[toobaalvi]

Oh that’s enough.. i just wanted to understand the assumption. Thank you! 🙂

[toobaalvi]

am i right?

[toobaalvi]

Oh ok they have just typed it wrong

[toobaalvi]

thank you! 🙂

[toobaalvi]

I didn’t get your point.. If it is a loss of tax saving then why is it added to the benefit in the answer, it should have been subtracted then.

[toobaalvi]

Where? 😛

I’m talking about ‘lognomality’ and ‘perfect market’ assumption made by black scholes model. Can you please explain these? What is a normal distribution?

[toobaalvi]

And what is spare debt capacity?

[toobaalvi]

Is this benefit/ saving of interest on subsidy loan taxable? In Fubuki (Dec 10) this benefit is taxable. Co. can borrow at 7.5% but gov offered a subsidised loan on 80% of investment at 5.5%. tax is 25%
In the ans the benefit is: (14488*80%) x .02x 75%x Anniuty factor.

[toobaalvi]

I have seen your notes for VAR. But it just tells you the way to calculate it. I want to know the concept behind it. And what if we come across a value that isn’t in the normal distribution table?

Secondly i also wanted to confirm that the only assumption of MIRR is that cash flows are reinvested at the cost of capital of the company?

[toobaalvi]

*lognormality

[toobaalvi]

So that means we always have a short position to create a delta hedge?

Plus i can’t understand the ‘lognomality’ and ‘perfect market’ assumption made by black scholes model. Can you please explain these? What is a normal distribution?

[toobaalvi]

Thanks for the help!

[toobaalvi]

Thank you so much sir.
There’s another question. In bbp, terminal value is defined as “value of CFs occurring from period N+1 onwards i.e beyond the normal prediction horizon of periods 1 to N”. Why is it “N+1”? It should rather be just, any CFs after N.

[toobaalvi]

Thank you so much! 🙂

[toobaalvi]

you can see the snswer here

[toobaalvi]

https://opentuition.com/topic/how-to-choose-the-exercise-price-in-options/

[toobaalvi]

Thanks mike! 🙂
Umm.. I mean that there isn’t enough time left so which approach should i follow? Which will be more effective? I’m so confused! :s

[toobaalvi]

Thank you so much!!
And can you tell me that why does the value of currency future goes up as the spot goes up. It should go down as we can buy or sell currency at a high rate from the market, so in a way making futures useless! I know it depends on the value of underlying currency but why there is a positive relationship between them?

[toobaalvi]

Ok. Thank you so much! 🙂
I’ve another query.. We have seen that as interest rates go up, the price of the IR future goes down which is opposite to currency futures. Is there any theoretical logic behind this?

[toobaalvi]

Thank You sir! I got the first part.
And can we take it like this too; when interest rates goes up, people invest in government bonds as its risk free and return is high. And eventually supply of money decreases inflation? Does it make sense?

For the rest, I hope i’ll understand it too after reading your course notes.

And there’s one thing more I want to ask.. Are your course notes and lectures enough to pass the exam? Or reading the book is necessary? :p

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