1. Fancypants Menswear, Inc is considering launching a new line of chiffon cravats.
Over the next 3 years, the firm will produce the cravats for $200 and sell them for $800 apiece. After 3 years the line will be out of fashion and will be retired.
If they go ahead with the project, the firm will spend $10,000 more on advertising per year and will need to hold an additional $20,000 in inventory over the same period.
If the firm's tax rate is 21% and the appropriate discount rate is 10%, what is their break-even sales volume in total number of cravats? (assume the # sold is the same in all three years).
- 51
- 123
- 27
- 81
- 63
2. Given the following market data:
S&P 500 index = 2,680
1-month S&P500 call option with strike price $2700 trades at $45.05
Current 1-year T-bill yield = 1.2%
What is the implied volatility of the S&P500, i.e. at what level is the VIX?
- 22.5%
- 18.5%
- 25.6%
- 17.2%
- 30.1%