1. Coca-Cola stock is expected to trade at $68.20 in one year. The company will also pay a $2.55 dividend for the year. If you require a 11.00% return to own the stock, what intrinsic value do you place on it today?
2. Discuss the empirical evidence on the success of mergers and acquisitions. Do the bidding firms need to take care in approaching a merger deal? Explain.
3. Calculate (V0,?0) for a down-and-rebate option which pays 100 at the first time when the stock price is below the barrier K = 3. If the stock price is above the barrier for all times then the option expires worthless. Use N = 3.