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Download Financial Management Theory and Practice An asia 1st Edition Brigham Solutions Manual all chapters
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Chapter 8
Financial Options and Applications in Corporate Finance
ANSWERS TO END-OF-CHAPTER QUESTIONS
8-1 a. An option is a contract which gives its holder the right to buy or sell an asset at some
predetermined price within a specified period of time. A call option allows the holder
to buy the asset, while a put option allows the holder to sell the asset.
b. A simple measure of an option’s value is its exercise value. The exercise value is
equal to the current price of the stock (underlying the option) less the striking price of
the option. The strike price is the price stated in the option contract at which the
security can be bought (or sold). For example, if the underlying stock sells for $50
and the striking price is $20, the exercise value of the option would be $30.
c. The Black-Scholes Option Pricing Model is widely used by option traders to value
options. It is derived from the concept of a riskless hedge. By buying shares of a
stock and simultaneously selling call options on that stock, the investor will create a
risk-free investment position. This riskless return must equal the risk-free rate or an
arbitrage opportunity would exist. People would take advantage of this opportunity
until the equilibrium level estimated by the Black-Scholes model was reached.
8-2 The market value of an option is typically higher than its exercise value due to the
speculative nature of the investment. Options allow investors to gain a high degree of
personal leverage when buying securities. The option allows the investor to limit his or
her loss but amplify his or her return. The exact amount this protection is worth is the
options time value, which is the difference between the option’s price and its exercise
value.
8-3 (1) An increase in stock price causes an increase in the value of a call option. (2) An
increase in strike price causes a decrease in the value of a call option. (3) An increase in
the time to expiration causes an increase in the value of a call option. (4) An increase in
the risk-free rate causes an increase in the value of a call option. (1) An increase in the
standard deviation of stock return causes an increase in the value of a call option.
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.
SOLUTIONS TO END-OF-CHAPTER PROBLEMS
8-2 Option’s strike price = $15; Exercise value = $22; Time value = $5;
V = ? P0 = ?
Using the Black-Scholes Option Pricing Model, you calculate the option’s value as:
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.
ln (P/X) + [rRF + (σ 2 / 2)]t ln ($30 /$35) + [0.05 + (0.25 / 2)](0 .333333 )
8-5 d1 = = = − 0.3319 .
σ t 0.5 0.33333
8-6 The stock’s range of payoffs in one year is $26 - $16 = $10. At expiration, the option
will be worth $26 - $21 = $5 if the stock price is $26, and zero if the stock price $16. The
range of payoffs for the stock option is $5 – 0 = $5.
Equalize the range to find the number of shares of stock: Option range / Stock range =
$5/$10 = 0.5.
With 0.5 shares, the stock’s payoff will be either $13 or $8. The portfolio’s payoff will
be $13 - $5 = $8, or $8 – 0 = $8.
The present value of $8 at the daily compounded risk-free rate is: PV = $8 / (1+
(0.05/365))365 = $7.610.
The option price is the current value of the stock in the portfolio minus the PV of the
payoff:
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.
8-7 The stock’s range of payoffs in six months is $18 - $13 = $5. At expiration, the option
will be worth $18 - $14 = $4 if the stock price is $18, and zero if the stock price $13. The
range of payoffs for the stock option is $4 – 0 = $5.
Equalize the range to find the number of shares of stock: Option range / Stock range =
$4/$5 = 0.8.
With 0.8 shares, the stock’s payoff will be either 0.8($18) = $14.40 or 0.8($13) = $10.40.
The portfolio’s payoff will be $14.4 - $4 = $10.40, or $10.40 – 0 = $10.40.
The present value of $10.40 at the daily compounded risk-free rate is: PV = $10.40 / (1+
(0.06/365))365/2 = $10.093.
The option price is the current value of the stock in the portfolio minus the PV of the
payoff:
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted
to a publicly accessible website, in whole or in part.
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Arrival at Yule Island—The Sacred Heart Mission— Page 252-277
Death of a Brother—A service at Ziria—The
meeting of the Papuan East and West in Yule
Island—The Ibitoe—Making a drum—Marriage
customs—Omens—Tattooing—The Roro
fishers and traders—The Mekeo agriculturists—
The Pokao hunters—Markets—Pinupaka—
Mohu—Walk across the plain and through the
forest—Inawi—War and Taboo chiefs—Taboo
customs—Masks—A Mission festivity—Tops—
Veifaa—Women’s dress—Children’s games—
Return to coast
PART II
CHAPTER XVIII
JOURNEY FROM KUCHING TO BARAM
Arrival in Sarawak—Description of Kuching—The
Sarawak Museum—Visit to Sibu—Stay in
Limbang—A Malay sago factory—Visit to
Brunei—Method and aims of Rajah Brooke’s
Government Page 279-294
CHAPTER XIX
THE WAR-PATH OF THE KAYANS
Leave Limbang—A Kadayan house at Tulu—Rapids
on the Limbang—Ascent of the Madalam—The
Insurrection of Orang Kaya Tumonggong Lawai
—Enter the Trikan—Durian—Met by Mr.
Douglas—Old Jungle—Descend the Malinau
and Tutau—Kayan tattooing—Berantu
ceremony in the Batu Blah House—Arrival at
Marudi (Claudetown)—Kenyah drinking
customs Page 297-311
CHAPTER XX
THE COUNTRY AND PEOPLE OF BORNEO
The Geographical and Geological Features of Page 312-329
Borneo: Arrangement of mountains—The
geology of the “Mountain-land,” Palæozoic—
Mesozoic—the geology of the “Hill-land,”
Cainozoic—The geology of the Plains,
Quaternary—The geology of the Marshes,
Alluvium—Recent volcanic action. A Sketch
of the Ethnography of Sarawak: Punans—
Various agricultural tribes of Indonesian and
Proto-Malay stock—Land Dayaks—Kenyahs
and Kayans—Iban (Sea Dayaks)—Malays—
Sociological History of Sarawak—Chinese
traders
CHAPTER XXI
A TRIP INTO THE INTERIOR OF BORNEO
The Lelak house at Long Tru—Skull trophies—The
settled Punans on the Bok—Sarcophagus in
Taman Liri’s house—Divination by means of a
pig’s liver in Aban Abit’s house—Purchase of
some skulls—The Panyamun Panic in Sarawak
in 1894-5—Commencement of a similar scare
—Administrative duties at Long Semitan—
Character of the Sĕbops—The fable of the
monkey and the frog—A visit to Mount Dulit—
The Scott-Keltie Falls—The Himalayan affinities
of the fauna of Mount Dulit and of other high
mountains in Borneo Page 330-351
CHAPTER XXII
A TRIP INTO THE INTERIOR OF BORNEO—
continued
Ceremony of moving skulls into a new house at Page 352-380
Long Puah—Naming ceremony for Jangan’s
boy—Peace-making—Conviviality—Malohs
desire to marry some Sĕbop girls—Sĕbop
dances—Scenery on the Tinjar—Burnt house at
Long Dapoi—Panyamun Scare again—The
Dapoi—Long Sulan—Tingan’s matrimonial
mishap—News from the Madangs—A Punan
medicine man—Panyamun Scare settled—
Discovery of stone implements—A native
selling a stone implement for a loin cloth to die
in—A stone hook—A visit to Tama Bulan—The
unfortunate Bulan—Fanny Rapid—A Kenyan
love story
CHAPTER XXIII
NOTES ON THE OMEN ANIMALS OF SARAWAK
Archdeacon Perham on the omens of the Iban (Sea
Dayaks)—List of the omen animals of the
Kayans, Kenyahs, Punans, and Iban—Reputed
origin of “Birding” Page 381-393
CHAPTER XXIV
THE CULT OF SKULLS IN SARAWAK
Reasons for collecting heads—Head required for
going out of mourning for a chief—Kenyah
legend of the origin of Head-hunting—How
Kenyahs leave skulls behind when moving into
a new house Page 394-400
CHAPTER XXV
PEACE-MAKING AT BARAM
Padi competition—Obstacle race—Speech-making
—The Lirong jawa—Fracas and reconciliation
—Tuba-fishing in Logan Ansok—Great boat-
race—Monster public meeting—Enthusiastic
speeches, and Madangs formally received into
the Baram Administrative District Page 401-415
Index Page 417-426
LIST OF ILLUSTRATIONS
The Scott-Keltie Falls, Mt. Dulit, Baram
District, Sarawak Frontispiece
PLATE FACING PAGE
I. a. Ari, the Mamoose of Mer
18
b. Pasi, the Mamoose of Dauar
II. a. Rain Shrine, Mer
34
b. Doiom with Bull-roarer
III. a. Ulai
40
b. A Top-spinning Match, Mer
IV. a. Removing Sand from a Copper Maori
41
b. A Murray Island Feast
V. a, b, c. The Dance of the Malu Zogole 48
VI. a. The Malu Ceremony at Las
b. Ulai singing Malu songs into a
49
Phonograph: Gasu is beating the Malu
drum
VII. a. The Shrine of Zabarker
54
b. Tomog Zogo
VIII. a. The Islands of Waier and Dauar from the
beach of Mer, with a Fish Shrine in the
64
foreground
b. U Zogo, the Coconut Shrine of Dauar
IX. a. Debe Wali and his Wife
72
b. Jimmy Rice and his Wife
X. a. Iasa, Kiwai
b. Side view of the Soko-Korobe Clan-house 99
at Iasa
XI. a. Waria, Peter, Tom, and Gizu of Mabuiag
b. Nēĕt, or Platform from which Dugong are 123
harpooned
XII. a. Man dressed up for the Death Dance 139
b. Divining Skulls: 1. Skull of Magau of Nagir;
2. A Murray Island Skull
XIII. a. The Marine Village of Gaile
206
b. Bulaa
XIV. a. Girls of Babaka dressed for the Annual
Ceremony
218
b. Girls on the Dubu at Babaka for the Annual
Ceremony
XV. a. Hollowing out a Canoe with Stone Adzes at
Keapara 220
b. A Bulaa girl being tattooed
XVI. a. A Native of Bulaa
223
b. A Bulaa youth with Ringworm
XVII. a. Dubu at Kamali
232
b. Dubu Dance at Gomoridobo
XVIII. a. Udia and Daube, Taburi, Koiari
b. Elevara, Port Moresby, with the London 243
Missionary Society’s Station in the
background
XIX. a. Gewe, Chief of Agi, when deprived of his
Hat 245
b. Gewe, with his Hat restored
XX. a. Tree House at Gasiri
b. Pottery-making at Hanuabada, Port 248
Moresby
XXI. a. A Mekeo Ibitoe
b. Masked Man, Kaivakuku, of Waima, 256
Mekeo District
XXII. a. Mohu, Mekeo District
268
b. Marea at Mohu
XXIII. a. Regatta at Kuching
b. View from Kaban Hill, with the Brunei Hills 280
in the distance
XXIV. a. Brunei 290
b. A Family Bathe
XXV. a. Orang Kaya Tumonggong Lawai, a Long
Pata Chief in war costume, with a
300
Kenyah shield
b. A Sleeping-hut in the Jungle
XXVI. a. Ascending a Rapid
b. House of the Orang Bukits at Long Linai, 306
Tutau River
XXVII. a. Punans
b. A Lelak man with typical Tattooing on 320
shoulders and upper arms
XXVIII. a. Side view of a Kayan House
b. Verandah of a Kayan House at Long 331
Lama, Baram River
XXIX. a. Shrine outside Tama Bulan’s House
b. Bulan
376
c. Saba Irang, the Head Chief of the
Madangs
XXX. a. Skull Trophy in a Kayan House
b. Skull Trophies in Aban Abit’s House at 396
Long Tisam, Barawan tribe
XXXI. a. Beating Tuba and baling the Infusion out of
a Canoe
408
b. Penchallong prepared for the Great Peace-
making
The photographs for Plates i.-iv. a., vi. b., vii. b., viii. b.-xi. a., xii. a.,
xiii.-xvi., xvii. a., xviii. a., xix.-xxii. were taken by the late A. Wilkin;
those for Plates xvii. b., xxv. a., xxvii. b., xxx. a. were taken by C. G.
Seligmann; Plate iv. B. by Dr. C. S. Myers; xii. b. by H. Oldland; and
the Frontispiece and Plates v., vii. a., viii. a., xviii. b., xxiii., xxiv., xxv.
b., xxvi., xxvii. a., xxviii., xxix., xxx. b., xxxi. by the Author. Plates vi.
a. and xi. b. were drawn from photographs taken by the Author by
his brother Trevor Haddon. With the exception of Plate xxx. b. none
of the photographs have been retouched.
The skulls depicted on the cover are drawn from a photograph of a
trophy collected by the Author at Mawatta, p. 115.
LIST OF FIGURES IN THE TEXT
FIG. PAGE
1. The Hill of Gelam, Murray Island 15
2. Murray Island from the south 16
3. Waier and Dauar 17
4. Model of the Bomai Mask of the Malu Ceremonies 47
5. Pepker, the Hill-maker 65
6. Ziai Neur Zogo, a Therapeutic Shrine 65
7. Native drawings of some of the Nurumara (totems) of
Kiwai 102
8. Agricultural Charms of Kiwai 105
9. Neur Madub, a Love Charm 106
10. Shell Hoe used by the Natives of Parama 110
11. Bamboo Beheading-knife and Head Carrier, Mawatta 115
12. The Kwod, or Ceremonial Ground, in Pulu 139
13. Drawing by Gizu of a Danilkau, the Buffoon of the
Funeral Ceremonies 140
14. Drawing by Gizu of Mŭri ascending a Waterspout 141
15. Dugong Harpoon and Dart 149
16. Marine Plants (Cymodocea) on which the Dugong
Feeds 152
17. Drawing by Gizu of the Method of Harpooning a
Dugong 153
18. Wooden Dugong Charm from Moa 154
19. Drawing by Gizu of Dorgai Metakorab and Bu 167
20. House on Piles at Saibai, with the lower portion
screened with leaves 173
21. Restoration of the Kwod in Tut during the Initiation
Period 177
22. Restoration of the Kwod in Yam 179
23. Rock Pictographs in Kiriri 185
24. Umbalako (Bull-roarers) of the Yaraikanna Tribe, Cape 191
York
25. Irupi Dance, Babaka 217
26. Palm-leaf Toys, Bulaa 226
27. Tattooing in the Mekeo District 260
28. Afu, or Taboo Signal, Inawi 271
29. Boys at Veifaa dressed up as Fulaari 275
30. Kayan Tattoo Designs 306
31. Berantu Ceremony of the Orang Bukit 307
32. Butiong in a Lelak House 333
33. Sarcophagus of a Boy in a Barawan House 334
34. Praying to a Pig in a Barawan House 336
35. Mount Dulit from Long Aaiah Kechil 347
36. Long Sulan 361
37. Kedaman and Kelebong at Long Sulan 362
38. Stone Implements from the Baram District, Sarawak 369
39. Magical Stone Hook 371
40. Figure-heads of Canoes, Baram District 407
All the above illustrations except Figs. 13, 14, 17, and 19 were
drawn by the Author.
LIST OF MAPS
PAGE
Map of Torres Straits 13
Sketch Map of British New Guinea 195
Map of the Central District, British New Guinea 237
Map of the Mekeo District, British New Guinea 263
Sketch Map of the Baram District, Sarawak 295
Geological Sketch Map of Borneo 313
THE LOST LEGION
And some of us drift to Sarawak,
And some of us drift up the Fly.