I want you to give this to expert of modeling in finance, methods used should be boom and opbs. I want only part a to be done , so its only half of the assignment. I only have 18 hours.
Mini-Case for class discussion for Lecture 10 1 Monash University Malaysia BFW3540 Modelling in Finance Case Study Let’s Refuel America On May 7, 2008, Chrysler, in the US, announced a deal called “Let’s Refuel America”, where the purchaser of certain new models of vehicles would receive a card that allows the holder to purchase a gasoline or diesel fuel that locks in the price at $2.99 a gallon for three years with 12,000 miles of driving a year. Please read the “Chrysler Deal.PDF” files for more information. (a) Estimate the value of this Deal to the potential buyer for the following two models: Dodge Caliber: 24 MPG Dodge Ram: 15 MPG So, the buyers of Dodge Caliber can purchase up to 500 gallons of gasoline at $2.99 per gallon per year, and the buyer of Dodge Ram can purchase up to 800 gallons at $2.99 per gallon per year for the next three years.1 Use as many different methods or models as your group can think of. Also, discuss the limitations and attractiveness of each of the methods or models you use. When valuing the Deal use the following information: i. Assume that the spot gasoline price at the time of the Deal's valuation is $3.613 per gallon. ii. Assume that the risk-free interest rate is 1.55% compounded continuously. iii. If you need the historical gasoline prices, use the “U.S. All Grades Conventional Retail Gasoline Prices” contained in the posted Excel file – use Sheet named “Data 1” column B. (b) If you have to choose between this Deal and $1,550 rebate, which one would you choose for which model? The choice is either get the Deal that allows you to 1 This is a three-year deal. The buyer of the Dodge Caliber can buy enough gasoline to drive 12,000 miles per year or 12,000/24 =500 (gallons) every year for the next three years. Similarly, for Dodge Ram, the miles per gallon (MPG) is only 15, the buyers of Dodge Ram can purchase 12,000/15 = 800 gallos per year. 2 purchase 500 gallons (Dodge Caliber) or 800 gallons (Dodge Ram) at $2.99 per gallon per year for the next three years or you take a cash rebate of $1,550 instead of the Deal. The rebate will reduce the price by $1,550. Discuss the risk implication of taking the rebate. Information attached or posted: 1. Description of the Deal as reported by USA TODAY (PDF filename: Chrysler Deal.pdf). 2. Historical weekly gasoline price from EIA (Excel filename: “Weekly gasoline price.xls”) U.S. All Grades Conventional Retail Gasoline Prices (Cents per Gallon) given in Column B. Please note the following about the Deal. 1. Each buyer of the two models under consideration will receive a card, a sample image of the card is given below: This card will be used every time you exercise the option to purchase gaoline at $2.99 per gallon. The computer system will keep track of how many gallons of gasoline you have already purchased at $2.99 in a year, and, if this amount exceeds 500 gallons for Caliber or 800 for Ram, you cannot exercise the option because you would have exceeded the limit for the year. You need to wait for the next year if it is within the 3- year limit. 2. After three years, the card would expire. Please note the following about the presentation and submission of the presentation slide: 1. This is a group project, which requires an in-class presentation. 2. You submit the presentation slide by 11:59 PM, October 11, 2021. The submitted slides could be either a PowerPoint slide or PDF document. But, you can use other methods for presentation. You do not need to submit a separate report – I will grade based on the slides and presentation. Each group also requires to submit the Excel file used for the computation. The presentation will be done during the workshop time slot (on October 12) or Tutorial slots. I will ask for volunteers for early presentations. If that does not work out, I will pick the sequence of presentations randomly. 3 3. The presentations will be done on October 12 & 13, 2021, during workshop or tutorials – more information will be posted on the presentation schedule. The presentation should consist of (i) Introduction, (ii) Methodology, (iii) Results, and (iv) Conclusion. Your Result Section should contain a table showing the value of the dDal for each model of vehicle – one row per method. Method Deal Value (Dodge Caliber) Deal Value (Dodge Ram) Rebate Value Method 1 $1,550 Method 2 $1,550 : : : : 4. Each presentation should last approximately 8 minutes, and each group member must do the presentation. Note on the following regarding the analysis: The following steps need to be clear: (a) First, you need to be clear on what option you are valuing, which needs to specify five variables: (1) spot price, (2) risk-free interest rate, (3) time to expiration, (4) volatility, and (5) exercise price.2 (b) You need to clearly specify values you used for these variables and briefly explain where did you get values of these variables (given to you as instructed by me or briefly mention the estimation method if you estimated them). For example, how did you estimate volatility – you do not need to put the formula for sample standard deviation – simply saying sample standard deviation from the series starting from time x to time xx. The grading is based on the following: (1) The number of different methods you use and different assumptions you make. Simply presenting many different methods that does not add value to the models already presented will not get any extra marks. It may help if you mention the reasons behind not using certain models. (2) Correctness of your presentation and what you say during the presentation. (3) Quality of the presentation – clarity, confidence, feels that you know what you are talking about. 2 Note that this is not a textbook exercise but a real world situation. Therefore, you need to make some reasonable assumptions regarding the values of these five variable. Ofcourse, the values of some of these variables are given to you, e.g., the spot price ($3.613 per gallon), risk-free rate ( 1.55% continuously compounded), and exercise price ($2.99 per gallon). 4 (4) Appearance of presentation slides matters but not much – so spending more time on beautifying the slides rather than making sure the materials are correct is not useful. For example, you have a beautiful presentation, but the models are not suitable, and values of the variables are wrong, then you will not receive high marks. First, the results and models have to be correct or suitable for the beauty of the presentation to be considered. (5) Finally, it also depends on how your presentation and the content of the presentation compare with that of others. Contents Workbook Contents U.S. All Grades and All Formulations Click worksheet name or tab at bottom for data Worksheet NameDescription# Of SeriesFrequencyLatest Data for Data 1All Grades Conventional20Weekly5/5/2008 Data 2All Grades Reformulated18Weekly5/5/2008 Data 3All Grades, Areas and Formulations28Weekly5/5/2008 Release Date:5/5/2008 Next Release Date:5/12/2008 Excel File Name:pswrgvwag.xls Available from Web Page:http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_history.html Source:Energy Information Administration For Help, Contact:infoctr@eia.doe.gov (202) 586-88005/5/2008 4:08:08 PM Data 1 Data 2 Data 3 http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_history.html Energy Information Administration infoctr@eia.doe.gov Data 1 Back to ContentsData 1: All Grades Conventional SourcekeyMG_TCO_USMG_TCO_P1MG_TCO_1AMG_TCO_1BMG_TCO_1CMG_TCO_P2MG_TCO_P3MG_TCO_P4MG_TCO_P5MG_TCO_COMG_TCO_FLMG_TCO_MNMG_TCO_NYMG_TCO_OHMG_TCO_TXMG_TCO_WAMG_TCO_CLMG_TCO_D4MG_TCO_M1MG_TCO_SE DateU.S. All Grades Conventional Retail Gasoline Prices (Cents per Gallon)East Coast All Grades Conventional Retail Gasoline Prices (Cents per Gallon)New England (PADD 1A) All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Central Atlantic (PADD 1B) All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Lower Atlantic (PADD 1C) All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Midwest All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Gulf Coast All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Rocky Mountain All Grades Conventional Retail Gasoline Prices (Cents per Gallon)West Coast All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Colorado All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Florida All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Minnesota All Grades Conventional Retail Gasoline Prices (Cents per Gallon)New York All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Ohio All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Texas All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Washington All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Cleveland, OH All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Denver, CO All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Miami, FL All Grades Conventional Retail Gasoline Prices (Cents per Gallon)Seattle, WA All Grades Conventional Retail Gasoline Prices (Cents per Gallon) Nov 28, 1994117.5120.8123.2126.2119.2112.2120.9122.6 Dec 05, 1994114.3118.3120.2124.9116.1108.6117.7121.5 Dec 12, 1994111.8116118.5123113.7105.7116120.6 Dec 19, 1994109.9114.1116.6121.5111.7103.9114.9117.5 Dec 26, 1994108.8113.4116.1121.1110.9102.7113.6115.3 Jan 02, 1995110.4111.9115.9121109.4102.5112.9116.8128.1 Jan 09, 1995111.1111.8115.4120.8109.3104.6113115.7128.1 Jan 16, 1995110.2111.4115.3119.7109103.1112.8114.7127.6 Jan 23, 1995111111.2114.9119.1109105.4112.2115.7127.2 Jan 30, 1995110.9111.1114.9118.4109.1105.5112.6114.3126.8 Feb 06, 1995110.3110.9115.1118108.8104.5112.4113.1126.2 Feb 13, 1995109.9110.4114.6117.5108.4104111.6113.9125.5 Feb 20, 1995109.3110.1114.4117108.1103.1111113125.5 Feb 27, 1995110.1110.1114.4116.5108.3105.2111.7111.9125.6 Mar 06, 1995110.3110.2114.2116.3108.5105.3111.6114.6125.4 Mar 13, 1995109.6109.9114.2116108.1104.2111.2113.2125.3 Mar 20, 1995109.5109.5114.2115.4107.8104.8110.2112.1125.3 Mar 27, 1995110.2109.4113.3115.2107.8106.5110.5115.1124.4 Apr 03, 1995111.6110.1113.7115.5108.5109.1111.8114.5125.2 Apr 10, 1995113.4111.5114.4116.2110.2110.9113.9117.6126.3 Apr 17, 1995114.9113.6115.1117.7112.5112.3115.9117.1127.1 Apr 24, 1995117.3116.6117.2120115.6114.8118.4116.3128.2 May 01, 1995118.1117.9118.9122116.7114.4120.2119129.3 May 08, 1995120.4120.5120.4124.6119.4117