If volatility or interest rate are not constant in the market what values to put in the Black- Scholes model?
550682
Oy that is a great question.  I take it you taking a risk managment or a derivative course! ;)  Basically you would have to put in functions (functions of interest and volatility variations) for both and then evaluate it accordingly.  It is nearly impossible to do by hand but computer can provide you with some good insight :).  That's when 3D probability that engineers love so much kicks in.  \n\nRival
205899
Many approaches:\n\n1) Discount cash flow method. Work out all the projected free cash flows of the company and then do a dcf on it. The key is not in doing up the model - the key is in your assumptions (as in all models);\n\n2) Multiples - look for a listed company in a similar industry and use a EBITDA multiple to find out an approx value. Check yahoo finance - it is rather good for info finding;\n\n3) Asset valuation method - not as accurate as the above but add up all the assets of the company. Note that the sum may be worth more than each piece if all is functioning together well;\n\n4) replacement value - check out the market values of all the assets and value that. \n\n5) Net Asset Value - Assets minus liabilities for a really general ballpark figure. \n\nI generally use 1 & 2. 3-5 are just very general guides.
670289
Set up the expected after-tax cash flows under both scenarios.  Take the present value of these cash flows. Set the present value of one scenario minus the present value of the other equal to zero.  Use Excel's internal rate of return function to solve for the interest rate.
747582
required rate of return = risk free rate + beta (market rate - risk free rate)\n                                    = 0.075 + 2(0.15 - 0.075)\n                                    = 0.225 or 22.5%
470901
first of all, u have to determine how will the price move. u need a probability destribution. ok.. u did. Brownian. then, the idea is simply to calculate the expectation of it's future value. since european options can only be exercised on the expiry date, this is very straight forward.\n\nThe idea is simple. u just need to solve the math which can get messy. But that's not a big problem. good luck.
397618
if q is de debt to equity ratio, then D=qE, where D is debt and E is equity. Since assets is equal to debt + equity, then A (assets)=D+E=qE+E=E(q+1)\nflow for equity holder is\nA xR -D x i , where R is return on assets and i is interest rate.\nThus, Return on Equity=R(q+1)-qi
418085
It depends upon the fund.  Some price hourly, however 99% of firms price their funds at the close of business.  When they release the information is specific to the firm and when it appears is specific to the data provider.  You should presume that any price you see was the close of business the prior day, unless you specifically know otherwise.  Since funds are not designed to daytrade and since funds have strange redemption rules based upon the phrasing of the Investment Company Act, it doesn't matter much because you are pretty much required to sell or buy blind.  \n\nIf I buy at noon tomorrow, it will be at the next official price, which is usually close of business and will happen on the following day.  So if the price tonight is 10.13, the real but undisclosed price tomorrow at noon is 10.12 but finishes at 10.14, then I will pay 10.14 the day after tomorrow at the opening of business probably but at some point in the day.\n\nClosed end funds only update once per week, usually on Fridays.
312984
Let's say a bond is paying 10% and its par value is 100, so a coupon payment for one year is 10.\n\nIf interest rates go up to 11%, to pay its coupon payment of 10, the value has to drop to 90.9 to match up.\n\nSimilarly, if interest rates go to 9%, to get a coupon of 10, the value has to go up to 111.11 to match up and give the same coupon.\n\nSo, when rates rise, the price goes down and vice versa.
317342
Most important is probably the S&P/Moody's ranking.  The higher/safer the ranking, the lower the interest rate that it has to pay.  Over time, if the ranking changes, then the value of the bond changes.  Changes can come from the company doing well/poorly over time.\n\nGeneral interest rates also determine the value.
171946
You have riskless securities such as tresury bills. they have a fixed rate of return after a certain time. it is known and fixed.\n\nhowever, if you take stocks for instance, the rate of return will be higher, as there is a risk involved. in the rate of return was not higher, you would never go for a riskier option and stick to the garanteed return.\n\nthe amount of extra return on a risky secutiy is the investors 'premium on risk'. the riskier the investment, the higher the returns
890092
Kinda' depends on what you're investing in, but basically, I would look at rate of return over at least a 10 year period (absolute minimum 5 years).  Longer track records are better.  Ten percent or more is good.  Don't forget to factor in taxes, risk, and inflation.  For example, taxes will eat about 2.5% of your 12%.  Inflation will eat about 4% of your 12%.  And risk is dependent on the type and volatility of the investment.
868924
This is the Black-Scholes option pricing formula that is used to price European-style options.\n\nN(d2) and N(d1) are taken from the normal probability distribution tables. You are missing two more formulas there. That is, there's a separate formula for d1 and d2. See here for them:http://en.wikipedia.org/wiki/Black-Scholes\n\nOnce you have all the variables, just plug them in and get your option price.
700205
It depends on the interest rates, what instruments of investment your using and the apr rates.
104390
S&P 500 index, Australia index, and a small cap value iShare.\n\nHmm, I would have to ask why you wanted to be exposed to australia stocks in particular. Maybe you have a good reason. The other two are a good way to come out right about market returns.\n\nIf you want above market returns you will have to do something out of the ordinary. Read this book and see if its for you:\nhttp://search.barnesandnoble.com/bookSearch/isbnInquiry.asp?r=1&isbn=0471733067
1170586
What you are hoping to capture by buying a calendar spread is the decay of the first expiring option relative to the decay of the second. Read "Options as a Strategic Investment".\n\nA short term option loses its time value faster than a longer term option. So, if the decay on the longer is a penny a day...and the decay on the shorter option is 1/8 a day...you are capturing 11 1/2cents per day and protecting yourself in case of a big market move. Is it a given that you'll make money??? Absolutely not. Every time you think that, think to yourself "there are a million other people out there that have thot about this for at least 25 years...chances are I am not thinking anything original" !
609896
Bond prices go down as interest rates go up and vice versa.  Bonds need to pay the going rate in the market or they will not sell.  If interest rates go up, the rate that bonds must pay also goes up.  When these rates go up, any existing bonds that are being held drop in price because no one will pay the same price for a bond with a lower interest rate.  \n\nEx: I buy a bond today for $1000 with a coupon rate(interest rate) of 5%.  One year from now, a $1000 bond is available with a coupon rate of 6%.  An investor would no longer pay $1000 for the first bond because they could buy the second bond for the same price and receive more interest.  So the price of the 5% bond would drop.
398175
take historical closing prices from the stock you want to calculate the beta depending on your time frame of work. then take the historical closing price of the S&P 500 in the same period. Download it to a spreadsheet or excel.\nCalculatethe daily return (price 2-price 1)/price 1 on the stock and the S&P. Go to excel and execute a linear regression between the two subset of values.\nVoila you will have a equation stock return = alpha + beta(s&p return).\n\nIf you want to make it more complicated you can go to the CPM model and use the risk-free interest rate, but there is little use about it. At the end, you believe whatever Valueline, bloomberg is telling you.