1. XYZ’s stock price is $10/share. In one year, the price will either rise to $14 (50% probability) or fall to $9. XYZ will not pay any dividends. The riskless interest rate is 20% (i.e., if you borrow $100, you need to repay $120 in one year). What is the delta of the call option?
2. Capstone Investments is considering a project that will produce cash inflows of $11,000 at the end of Year 1and 2, $24,000 in Year 3, and outflow of $36,000 in Year 4. What is the present value of these cash inflows at a discount rate of 8%?