1. Why are cash flows important for a financial manager to assess and analyze? What is the difference between Net Income and Cash Flows?
2. Four years ago, you purchased a convertible bond at par with a ten year maturity with an 8% coupon. The conversion ratio of the bond is 25. The current market price of the stock is $50. Calculate the conversion value.
3. You need to borrow funds for 2 weeks but can only get a discount loan with a stated rate of interest of 7.5%. If you need to have $100,000 in cash, how much should you borrow?
4. What should you do if you come across a 2-year option pair with a strike price of $100, a spot price of $100, a call premium of $22, a put premium of $15, and the risk-free rate is 5%?