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jolancunningham
jolancunningham
12.02.2020 • 
Mathematics

Pricing Formulas The following formula will be needed: 02 = 12 (a) (3 points) An asset with price S at time 0 pays some cashflows. The cashflows are worth Ca with probability p and Co with probability 1-p and are paid annually from time 1 to time T. Provide a formula for the asset price S by assuming that the annualized) discount rate is r. (b) (3 points) An asset with price S at time 0 pays some cashflows. The cashflows are worth C, are paid every 6 months, and are perpetual. Provide a formula for the asset price S by assuming that the annualized) discount rate is r. (c) (3 points) An asset with price S at time 0 pays some cashflows. Cashflows worth C, are paid annually from time 1 to time T. In addition, cashflows worth Care paid annually from time T +1 to infinity (perpetuity). Provide a formula for the asset price S by assuming that the annualized) discount rate is r. (a) (3 points) An asset with price S at time 0 pays some cashflows. The cashflows are worth C with probability P, C, with probability P2, and C3 with probability 1 - P - P2. These cashflows are paid every n months (perpetuity). Provide a formula for the asset price S by assuming that the (annualized) discount rate is r. (e) (3 points) An asset with price S at time 0 pays some cashflows. Perpetual cashflows worth Ca are paid every odd years (1, 3, 5,...). In addition, perpetual cashflows worth C are paid every even years (2, 4, 6,...). Provide a formula for the asset price by assuming that the annualized) discount rate is r.

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