1. What does analyzing companies against their industry using ratio analysis tell us? What ratios would you use to do the analysis and why?
2. Find the price of a three year, 6% coupon bond that is yielding 7%. The principal is 1000.?
3. The one year call option on Caddo Inc. stock has an exercise price of 45. The current value of Caddo is 46. On the maturity date, the value of Caddo will be either 51 or 43. The risk free rate is 3%. Use the binomial option pricing model to find a fair value for the call option.