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Portfolio Selection Project 1 1 Part One 1. Read Brown and Warner (Journal of Financial Economics, 1985) and summarize main analysis and equations 2. Reproduce key equations using equation editor Part...

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Portfolio Selection Project
1
1
Part One
1. Read Brown and Warner (Journal of Financial Economics, 1985) and summarize main analysis and equations
2. Reproduce key equations using equation edito
Part Two
1. CORPORATE EVENT TO BE STUDIED IS DIVIDEND EMLIMIANTION
2. Create a sample of at least 30 observations using newswire sources. Factiva (available through Hofstra li
aries homepage) provides Dow Jones and Reuters news reports. Log date and time (EST) of newswire report. Events that occur after market close will have event date on the next day. You must document your event with weblink, screenshot, etc. and include with submission.
3. Download historical data (-250, +10) around each event date for each company. Download contemporaneous market data (S&P500 index) for each company in your sample.
You may use Yahoo! Finance (easiest) or CRSP (Center for Research in Security Prices) available through WRDS. To use WRDS you need to request access to receive approval.
4. Analysis will be based on:
· Raw returns
· Market-adjusted returns
· Risk-adjusted returns
· Draw conclusions and statistical significance
5. Analyze t-statistics for event dates and windows below. In addition, the t-statistics are computed for raw returns, market-adjusted returns, and risk-adjusted returns. There is a total of 15 t-statistics to compute.
a) t = -1
) t = 0
c) t= +1
d) t= (-1, 1)
e) t= (0, 5)
6. Conduct cross-sectional analysis on abnormal returns only (Dependent variable) and several firm-specific (independent) variables relevant to your topic. Hypothesize why you chose these independent variables and justify with citation from academic literature (if possible).
INDEPENDENT VARIABLES ARE:
liquid funds or liquidity
-net profit
-amount of dividend
AR (on day 0) = b0 + b1X1 + b2X2+ b3X3
Full output and interpretation required: t-statistics, p-value, R2, adjusted R2, F-statistic.
7. Deliverable is Word file (not pdf) of report following basic academic format: abstract, introduction, data/sample, methodology, empirical tests and results, conclusions and limitations.
8. Excel work submitted as separate file on BB
Updated June 2020

COVER
STUDENT'S NAME:
COURSE: FINANCE 205 A
PROFESSOR:
ASSIGNMENT: EVENT STUDY
TOPIC: DIVIDEND ELIMINATION
DATE: 06/13/2020
SAMPLE
    Column1    DATE    COMPANY    SOURCE
    1    11/3/16    MDC PARTNER    https:
seekingalpha.com/news/ XXXXXXXXXXmdc-partnersminus-21_4-misses-in-q3-suspends-dividend
    2    4/30/20    DUNKIN BRANDS GROUP    https:
www.dividend.com/news/2020/04/30/dunkin-
ands-group-suspends-dividend-covid-19-crisis
    3    12/16/19    Kewaunee Scientific     https:
www.bloomberg.com/press-releases/ XXXXXXXXXX/kewaunee-scientific-reports-results-for-second-quarter-suspension-of-dividend
    4    12/20/17    PG&E     http:
investor.pgecorp.com/news-events/press-releases/press-release-details/2017/PGE-Announces-Suspension-of-Dividend-Citing-Uncertainty-Related-to-Causes-and-Potential-Liabilities-Associated-with-Northern-California-Wildfires/default.aspx
    5    4/27/20    General Motors     https:
www.cnbc.com/2020/04/27/general-motors-suspends-dividend-stock-buybacks-to-preserve-cash.html
    6    5/15/12    JCPenny     https:
www.marketwatch.com/story/jc-penney-swings-to-loss-suspends-dividend XXXXXXXXXX
    7    11/8/19    Tupperware Brands    https:
ir.tupperware
ands.com/stock-information/dividend-history
    8    10/26/17    Mattel’s     https:
money.cnn.com/2017/10/26/investing/mattel-q3-earnings/index.html
    9    9/3/19    Superior Industries International Inc.    https:
www.businesswire.com/news/home/ XXXXXXXXXX/en/Superior-Announces-Suspension-Quarterly-Common-Dividend
    10    4/20/20    Las Vegas Sands     https:
www.cnbc.com/2020/04/20/sheldon-adelson-fails-to-comply-with-a-mantra-hes-used-for-years-yay-dividends.html
    11    4/24/20    Moog inc.    https:
www.businesswire.com/news/home/ XXXXXXXXXX/en/Moog-Reports-Quarter-Results
    12    5/21/18    Li
ey Inc.    https:
www.prnewswire.com/news-releases/li
ey-suspends-quarterly-cash-dividend-to-further-prioritize-debt-reduction-and-strategic-investments-reaffirms-2018-guidance XXXXXXXXXXhtml
    13    4/15/20    Estee Lauder     https:
markets.businessinsider.com/news/stocks/companies-cut-suspended-dividends-coronavirus-fallout-april-cancel-shareholders-pay XXXXXXXXXX#4-estee-lauder-suspends-its-dividend4
    14    4/30/19    Meridian Bioscience     https:
seekingalpha.com/news/ XXXXXXXXXXmeridian-bioscience-suspends-quarterly-cash-dividend
    15    12/20/18    Wheeler REIT     https:
seekingalpha.com/article/ XXXXXXXXXXwheeler-real-estate-investment-trust-after-suspension-of-prefe
ed-dividends-now-what
    16    4/17/20    AMC Entertainment Holdings     https:
www.cnbc.com/2020/04/17/amc-says-it-can-withstand-theater-closures-until-thanksgiving.html
    17    12/2/16    Allegheny Technologies     https:
www.cnbc.com/2016/12/02/allegheny-technologies-falls-more-than-10-percent-after-dividend-cut.html
    18    2/28/18    Frontier Communications     https:
www.ba
ons.com/articles/after-frontiers-dividend-cut-facebook-and-disney-to-telecoms-rescue XXXXXXXXXX
    19    11/2/17    RAIT Financial Trust    https:
markets.businessinsider.com/news/stocks
ait-financial-trust-suspends-dividend-on-common-shares-quick-facts XXXXXXXXXX
    20    4/2/20    Dave And Busters Entertainment     https:
www.marketwatch.com/story/dave-busters-stock-rallies-on-earnings-beat-coronavirus-cost-cuts XXXXXXXXXX
    21    4/17/13    Ambassadors Group (EPAX)    https:
seekingalpha.com/dividends/dividend-news?page=383
    22    3/31/20     Cruise Operator Carnival     https:
www.ba
ons.com/articles/carnival-launches-6-billion-in-debt-and-stock-sales-its-also-suspending-its-dividend XXXXXXXXXX
    23    4/21/20    HCA Healthcare     https:
www.reuters.com/article/us-hca-healthcare-results/hca-healthcare-suspends-dividend-buybacks-as-covid-19-delays-surgeries-idUSKCN2231SA
    24    7/24/12    AKSteel     https:
www.marketwatch.com/story/ak-steel-loss-widens-suspends-dividend XXXXXXXXXX
    25    7/25/12    RadioShack     https:
www.dallasnews.com
usiness/2012/07/25
adioshack-suspends-its-dividend-to-shareholders-and-swung-to-a-second-quarter-loss
    26    2/22/11    Barnes and Nobles     https:
www.bloomberg.com/news/articles/ XXXXXXXXXX
arnes-noble-falls-after-dividend-halt-same-store-sales-rise
    27    9/23/08    American International Group     https:
www.businesswire.com/news/home/ XXXXXXXXXX/en/AIG-Announces-Suspension-Common-Stock-Dividends
    28    7/16/10    Bp     https:
www.marketwatch.com/story
p-suspends-dividend-after-deepwater-horizon-spill XXXXXXXXXX
    29    9/16/06    Ford     https:
www.wsj.com/articles/SB XXXXXXXXXX
    30    3/1/16    Tesco     https:
www.oilandgas360.com/tesco-corporation-reports-fourth-quarter-2015-results-and-announces-suspension-of-dividend
https:
seekingalpha.com/news/ XXXXXXXXXXmdc-partnersminus-21_4-misses-in-q3-suspends-dividendhttps:
www.cnbc.com/2020/04/27/general-motors-suspends-dividend-stock-buybacks-to-preserve-cash.htmlhttps:
www.marketwatch.com/story/jc-penney-swings-to-loss-suspends-dividend XXXXXXXXXX15https:
www.businesswire.com/news/home/ XXXXXXXXXX/en/Superior-Announces-Suspension-Quarterly-Common-Dividendhttps:
seekingalpha.com/dividends/dividend-news?page=383https:
www.prnewswire.com/news-releases/li
ey-suspends-quarterly-cash-dividend-to-further-prioritize-debt-reduction-and-strategic-investments-reaffirms-2018-guidance XXXXXXXXXXhtmlhttps:
markets.businessinsider.com/news/stocks
ait-financial-trust-suspends-dividend-on-common-shares-quick-facts-1006591374https:
www.oilandgas360.com/tesco-corporation-reports-fourth-quarter-2015-results-and-announces-suspension-of-dividend
RAW DATA
        C O M P A N I E S
        1    2    3    4    5    6    7    8    9    10    11    12    13    14    15    16    17    18    19    20    21    22    23    24    25    26    27    28    29    30
    DAYS    MDC PARTNER    DUNKIN BRANDS GROUP    Kewaunee Scientific     PG&E     General Motors     JCPenny     Tupperware Brands    Mattel’s     Superior Industries International Inc.    Las Vegas Sands     Moog Inc.    Li
ey Inc.    Estee Lauder     Meridian Bioscience     Wheeler REIT     AMC Entertainment Holdings     Allegheny Technologies     Frontier Communications     RAIT Financial Trust    Dave And Busters Entertainment     Ambassadors Group      Cruise Operator Carnival     HCA Healthcare     AKSteel     RadioShack     Barnes and Nobles     American International Group     Bp     Ford     Tesco
    -250    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.81    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.16    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 1,350.60    $ XXXXXXXXXX    $ 9.71    $ XXXXXXXXXX
    -249    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.30    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.10    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ - 0    $ XXXXXXXXXX    $ 1,349.40    $ XXXXXXXXXX    $ 9.76    $ XXXXXXXXXX
    -248    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.07    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 4.96    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 1,353.00    $ XXXXXXXXXX    $ 9.66    $ XXXXXXXXXX
    -247    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 7.97    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.13    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 1,371.80    $ XXXXXXXXXX    $ 9.72    $ XXXXXXXXXX
    -246    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.14    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.10    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ - 0    $ XXXXXXXXXX    $ 1,379.00    $ XXXXXXXXXX    $ 9.79    $ XXXXXXXXXX
    -245    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.17    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 9.98    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.37    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ - 0    $ XXXXXXXXXX    $ 1,378.20    $ XXXXXXXXXX    $ 9.96    $ XXXXXXXXXX
    -244    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.58    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 9.14    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.40    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 9.21    $ - 0    $ XXXXXXXXXX    $ 1,378.40    $ XXXXXXXXXX    $ 9.85    $ XXXXXXXXXX
    -243    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.51    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.90    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.46    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 9.12    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 1,387.80    $ XXXXXXXXXX    $ 9.95    $ XXXXXXXXXX
    -242    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.07    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.70    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.49    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 7.80    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 1,387.40    $ XXXXXXXXXX    $ 9.86    $ XXXXXXXXXX
    -241    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.04    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.66    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.39    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.45    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 1,402.20    $ XXXXXXXXXX    $ 9.86    $ XXXXXXXXXX
    -240    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 7.98    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.32    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 5.28    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 8.29    $ XXXXXXXXXX    $ XXXXXXXXXX    $ 1,370.60    $ XXXXXXXXXX    $ 9.89    $ XXXXXXXXXX
    -239    $ XXXXXXXXXX    $ XXXXXXXXXX    $
Answered Same Day Jun 12, 2021

Solution

Kushal answered on Jun 17 2021
141 Votes
Question 1
            d    Normal Distribution    Cumulative distribution        Mean    0
            -5.00    0.0000    0.0000        Standard Deviation    1
            -4.8    0.0000    0.0000
            -4.6    0.0000    0.0000
            -4.4    0.0000    0.0000
            -4.2    0.0001    0.0000
            -4    0.0001    0.0000
            -3.8    0.0003    0.0001
            -3.6    0.0006    0.0002
            -3.4    0.0012    0.0003
            -3.2    0.0024    0.0007
            -3    0.0044    0.0013
            -2.8    0.0079    0.0026
            -2.6    0.0136    0.0047
            -2.4    0.0224    0.0082
            -2.2    0.0355    0.0139
            -2    0.0540    0.0228
            -1.8    0.0790    0.0359
            -1.6    0.1109    0.0548
            -1.4    0.1497    0.0808
            -1.2    0.1942    0.1151
            -1    0.2420    0.1587
            -0.8    0.2897    0.2119
            -0.6    0.3332    0.2743
            -0.4    0.3683    0.3446
            -0.2    0.3910    0.4207
            0    0.3989    0.5000
            0.2    0.3910    0.5793
            0.4    0.3683    0.6554
            0.6    0.3332    0.7257
            0.8    0.2897    0.7881
            1    0.2420    0.8413
            1.2    0.1942    0.8849
            1.4    0.1497    0.9192
            1.6    0.1109    0.9452
            1.8    0.0790    0.9641
            2    0.0540    0.9772
            2.2    0.0355    0.9861
            2.4    0.0224    0.9918
            2.6    0.0136    0.9953
            2.8    0.0079    0.9974
            3    0.0044    0.9987
            3.2    0.0024    0.9993
            3.4    0.0012    0.9997
            3.6    0.0006    0.9998
            3.8    0.0003    0.9999
            4    0.0001    1.0000
            4.2    0.0001    1.0000
            4.4    0.0000    1.0000
            4.6    0.0000    1.0000
            4.8    0.0000    1.0000
            5    0.0000    1.0000
d values and probability
Normal Distribution    -5    -4.8    -4.5999999999999996    -4.3999999999999995    -4.1999999999999993    -3.9999999999999991    -3.7999999999999989    -3.5999999999999988    -3.3999999999999986    -3.1999999999999984    -2.9999999999999982    -2.799999999999998    -2.5999999999999979    -2.3999999999999977    -2.1999999999999975    -1.9999999999999976    -1.7999999999999976    -1.5999999999999976    -1.3999999999999977    -1.1999999999999977    -0.99999999999999778    -0.79999999999999782    -0.59999999999999787    -0.39999999999999786    -0.19999999999999785    0    0.2    0.4    0.60000000000000009    0.8    1    1.2    1.4    1.5999999999999999    1.7999999999999998    1.9999999999999998    2.1999999999999997    2.4    2.6    2.8000000000000003    3.0000000000000004    3.2000000000000006    3.4000000000000008    3.600000000000001    3.8000000000000012    4.0000000000000009    4.2000000000000011    4.4000000000000012    4.6000000000000014    4.8000000000000016    5.0000000000000018    1.4867195147342977E-6    3.9612990910320745E-6    1.0140852065486758E-5    2.4942471290053617E-5    5.8943067756540051E-5    1.3383022576488583E-4    2.919469257914613E-4    6.1190193011377515E-4    1.2322191684730251E-3    2.3840882014648547E-3    4.4318484119380301E-3    7.9154515829800067E-3    1.3582969233685689E-2    2.2394530294843017E-2    3.5474592846231626E-2    5.3990966513188306E-2    7.8950158300894496E-2    0.11092083467945597    0.14972746563574532    0.19418605498321345    0.24197072451914386    0.28969155276148323    0.33322460289180006    0.36827014030332356    0.39104269397545599    0.39894228040143265    0.39104269397545582    0.36827014030332328    0.33322460289179962    0.28969155276148267    0.24197072451914334    0.19418605498321292    0.14972746563574485    0.11092083467945557    7.8950158300894177E-2    5.3990966513188077E-2    3.5474592846231452E-2    2.2394530294842896E-2    1.3582969233685611E-2    7.9154515829799564E-3    4.4318484119379989E-3    2.3840882014648378E-3    1.2322191684730152E-3    6.1190193011377016E-4    2.9194692579145892E-4    1.3383022576488488E-4    5.8943067756539638E-5    2.494247129005344E-5    1.0140852065486669E-5    3.9612990910320397E-6    1.4867195147342843E-6    Cumulative Normal Distribution    -5    -4.8    -4.5999999999999996    -4.3999999999999995    -4.1999999999999993    -3.9999999999999991    -3.7999999999999989    -3.5999999999999988    -3.3999999999999986    -3.1999999999999984    -2.9999999999999982    -2.799999999999998    -2.5999999999999979    -2.3999999999999977    -2.1999999999999975    -1.9999999999999976    -1.7999999999999976    -1.5999999999999976    -1.3999999999999977    -1.1999999999999977    -0.99999999999999778    -0.79999999999999782    -0.59999999999999787    -0.39999999999999786    -0.19999999999999785    0    0.2    0.4    0.60000000000000009    0.8    1    1.2    1.4    1.5999999999999999    1.7999999999999998    1.9999999999999998    2.1999999999999997    2.4    2.6    2.8000000000000003    3.0000000000000004    3.2000000000000006    3.4000000000000008    3.600000000000001    3.8000000000000012    4.0000000000000009    4.2000000000000011    4.4000000000000012    4.6000000000000014    4.8000000000000016    5.0000000000000018    2.8665157187701349E-7    7.9332823554878473E-7    2.1124547034956365E-6    5.4125439523655672E-6    1.3345749027338094E-5    3.1671241831343622E-5    7.2348043927972228E-5    1.5910859015622059E-4    3.3692926567741033E-4    6.8713793791552735E-4    1.3498980316299924E-3    2.5551303304280903E-3    4.661188023718732E-3    8.1975359245961554E-3    1.3903447513498701E-2    2.275013194817932E-2    3.593031911292599E-2    5.4799291699558217E-2    8.07566592337714E-2    0.11506967022170878    0.15865525393145763    0.2118553985833973    0.27425311775007433    0.34457825838967659    0.42074029056089779    0.5    0.57925970943910299    0.65542174161032418    0.72574688224992645    0.78814460141660325    0.84134474606854293    0.88493032977829178    0.91924334076622882    0.94520070830044212    0.96406968088707412    0.97724986805182068    0.98609655248650152    0.99180246407540396    0.99533881197628127    0.99744486966957169    0.99865010196837001    0.99931286206208436    0.99966307073432203    0.99984089140984422    0.99992765195607136    0.99996832875816222    0.99998665425097588    0.99999458745605208    0.9999978875453247    0.9999992066715675    0.99999971334842808    d
Normal Distribution Probability
Cumulative distribution Probability
Question 2-A
        Inputs                    A.
        S0    20
        X    21                Two Step                C++                    Four Step                                                Six Step
        Risk Free Rate    10%                                28.8                                                        C++++
        U    1.2                        C+        7.8                                                        41.472                U    1.2                                            C++++++
        D    0.8333333333                        24                                                        C+++        20.472                D    0.8333333333                                            59.71968
        P    0.81                C0        3        C+-                                                34.56                        P    0.81                                    C+++++        38.71968
        1-P    0.19                20                20                                        C++        13.56        C+++-                1-P    0.19                                    49.7664
                            0        C-        0                                        28.8                28.8                                                C++++        28.7664        C+++++-
                                    16.67                                        C+        7.8        C++-        7.8                                                41.472                41.472
                                    0        C--                                24                24                                                C+++        20.472        C++++-        20.472
                                            13.89                        C0        3        C+-        3        C++--                                        34.56                34.56
                                            0                        20                20                20                                C++        13.56        C+++-        13.56        C+++--+
                                                                    0        C-        0        C+--        0                                28.8                28.8                28.8
                            Time Period    2                                            16.6666666667                16.6666666667                                C+        7.8        C++-        7.8        C+++--        7.8
                            Option price     5.03                                            0        C--        0        C+---                        24                24                24
                                                                                    13.8888888889                13.8888888889                C0        3        C+-        3        C++--        3        C+++---
                                formula : e ^ ( - r * t ) * ( p^2 * c++ + 2 * p * (1-p)* c +- + (1-p)^2 * c--)                                                    0        C---        0                20                20                20                20
                                                                                            11.5740740741                        0        C-        0        C+--        0        C++---        0
                                                                                            0        C----                        16.6666666667                16.6666666667                16.6666666667
                                                                                                    9.6450617284                        0        C--        0        C+---        0        C++----
                                                                                                    0                                13.8888888889                13.8888888889                13.8888888889
        As a the number of time period increases, the options prices keep increasing because the probability of the stock price above the strike price increases                                                                                                                            0        C---        0        C+----        0
        Because of this reason the options seller will need higher premium                                                                                                                                    11.5740740741                11.5740740741
                                                                    Time Period    4                                                                    0        C----        0        C+-----
                                                                    Option price     10.05                                                                            9.6450617284                9.6450617284
                                                                                                                                                    0        C-----        0
                                                                        formula : e ^ ( - r * t ) * ( p^4 * c++++ + 2 * p^3 * (1-p)* c +++- )                                                                                    8.0375514403
                                                                                                                    Time Period    6                                    0        C------
                                                                                                                    Option price     13.21                                            6.6979595336
                                                                                                                                                                    0
                                                                                                                        formula : e ^ ( - r * t ) * ( p^6 * c++++++ + 2 * p^5 *...
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