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Challenging question - can anyone here solve it?
Posted: April 8th, 2004, 5:12 am
by swapster
I wonder if anyone on this board can answer this:You are guaranteed a return of 2%on top of this you get a return of (X)*(amount by whichS&P 500 Return including dividends exceeds 2%)S&P 500 Vol is 20%Risk free rate is 5%Dividend yield is 1.5%What is a fair "X" to offer to clients........
Challenging question - can anyone here solve it?
Posted: April 8th, 2004, 6:01 am
by daveangel
it is not particularly challenging .. I assume the note is sold at PAR (ie 100) ?
Challenging question - can anyone here solve it?
Posted: April 8th, 2004, 6:50 am
by swapster
Yes sold at par
Challenging question - can anyone here solve it?
Posted: April 8th, 2004, 6:57 am
by capitalistpig
this was cross posted to the technical forum... already replied there.