Question
What put-call parity relationship must hold under no arbitrage?
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Answer
−C+PV(X)=P+S0
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Question
Why does the constant-growth DDM require r>g?
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Answer
Otherwise the denominator is zero or negative, making value invalid.
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Question
How is a bond priced using time value of money?
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Answer
Discount each coupon and principal at the required return.
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Question
What do the time value of money formulas FV=PV(1+r)n and PV=(1+r)nFV tell you economically?
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Answer
Money today and money later are equivalent after discounting or compounding.
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