1. Which of the following is the least effective way of hedging transaction exposure in the long run? a. long-term forward contract. b. currency swap. c. parallel loan. d. money market hedge. 2. If interest rate parity exists and transactions costs are zero, the hedging of payables in euros with a forward he
What are call and put options? What is the premium and and what is the strike price? How are American and European options different? How do options differ from futures?
Enter the letter of the description A through H that best fits each term 1 through 8. A. Records and tracks the bondholders' names. B. Is unsecured; backed only by the issuer's credit standing. C. Has varying maturity dates for amounts owed. D. Identifies rights and responsibilities of the issuer and the bondholders. E. C
I am looking for guidance in providing and analysis for a hypothetical case study. I have attached some background information and have to address below. 1) Provide an analysis that specifically addresses the advantages and disadvantages of each. 2) Provide a respond to Matthew Sullivan's and Zheng Hong's proposals in term
Two Stocks, X and Y, have three states of nature based on the state of the economy: State of Economy Probability Stock X Return Stock Y Return Recession 0.10 -0.20 0.30 Normal 0.60 0.10
4. A. Muncie Widget Inc. bought Euro call option for a strike price of $1.10 for March, 2007 paying 16.25 cents per unit. When they exercised the option, the spot price was $ 1.36. There are 62,500 units per Euro option. i. What is the break-even point for this option ? ii. Compute the total net profit/loss. What is th
Deeb Construction Co.'s stock is trading at $30 a share. There are also call options of the company's stock. Some with an exercise price of $25 and some with an exercise price of $35. All options expire in three months. Which of the following best describes the value of these options? a. The option with $25 exercise price wi
You work for a major defense contractor. Your company prepared and submitted a bid for a recent Department of Defense RFP, entitled Automated Mobile Defense System (AMDS). You have been assigned to lead Project X, which will design, develop, test, demonstrate and deploy 10 AMDS units to a location to be determined by the DoD ass
What caused this drop in money market interest rates? Please elaborate fully.
Here is an article referring to the stock options awarded to Steve Jobs at Apples in 2000. Back then, the Fortune magazine assessed the value of Jobs' options were worth a whopping sum of $872 million; however, Jobs countered it by stating their value was zero. Why did he say so? Who's right? Thoughts
ABC Corporation (Gomez Corporation) issued $3,000,000 of 9%, ten-year convertible bonds on July 1, 2007 at 96.1 plus accrued interest. The bonds were dated April 1, 2007 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2008, $600,000 of these bonds were co
Please provide information on long-term financing instruments and strategies for Apple computer.
4. What is the rate of return for an investor who pays $1,054.47 for a three-year bond with a 7% coupon and sells the bond one year later for $1,037.19? a) 5.00%. b) 5.33% c) 6.46% d)7.00% Chapter 8 10. The Modified Accelerated Cost Recovery System allows an increase: a) in total depreciation over the asset's
Barney Smith invests in a stock that will pay dividends of $3.00 at the end of the first year, $3.30 at the end of the second year, and $3.60 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $50. What is the present value of all future benefits if a discoun
A stock had a 12 percent return last year, a year when the overall stock market declined. Does this mean that the stock has a negative beta and thus very little risk if held in a portfolio? Explain.
Before you wrap up the campaign, you decide to spend a little time sharing information with investors on using derivatives to manage risk and enhance stock portfolio returns. You decide the best way to illustrate this is via a call option that customers can use on a stock that might have some upside potential. If the stock
1) AKX stock is currently trading at $50 today and in one period will either be worth 20% more or 20% less. The risk-free rate is 4%. What is the value of an at the money call option? A. $5.77 B. $6.00 C. $6.67 D. $10.00 E. $20.00
What is the Computer Telephone Integration (CTI) and explain the impact of this technology on multichannel contact centers.
Your client owns a lot of AA stock with a very low cost basis. Your client is worried that the price of AA stock will drop over the next six months, but he doesn't want to sell his AA stock and incur a capital gain. What strategies can he use?
Chapter 1 1. A taxable corporation faces a flat 35% marginal tax rate. What is the tax savings from an additional $100,000 deduction? A. $35,000 B. $100,000 C. -0- D. $65,000 2. A taxpayer will pay $50,000 at the end of Year 1 and also at the end of Year 2. Given a 5% discount rate, what is the present value of t
The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with an exercise price of $32 and one-year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?
How is a call option's price related to the underlying stock price at expiration date? How about a put option's price?Z
1) A particular call is the option to buy stock at $25. It expires 6 months and currently sells for $4 when the price of the stock is $26. a) What is the intrinsic value of the call? What is the time premium paid for the call? b) What will the value of this call be after 6 months if the price of the stock is $20? $30? And $40?
Question: Assume your friend's portfolio consists of two stocks A and B. The correlation coefficient of A and B is zero. Assuming the following additional data, calculate the risk and return of the portfolio.
1. Suppose you buy 100 shares of ABC at $79.25 and simultaneously write a March 80 Straddle at the prices given below. Make a spreadsheet and draw a profit/loss diagram and label all significant points for this strategy. March 80 call at $1.625 March 80 put at $3.50 2. XYZ Inc.'s JUN 300 calls ($4 1/4 each), JUN 305 c
5. The following companies have different financial statistics. What dividend policies would you recommend for them? Explain your reasons. Mathews Co. Aaron Corp. Growth rate in sales and earnings 5% 20% Cash as a percentage of total assets
How do options reduce a firm's financial risk? Under what circumstances would you recommend options as a risk-reducing strategy? (Examples)
You just bought 100 December 2007 put options selling at $5 of stock. The option has a strike price of $24.50 and the stock is selling at $20.50 per share. You want to make money and have no stock currently. a.How much of the $5 option price is a premium? b. How much did you pay for your investment in the 100 option contrac
Maverick Manufacturing, Inc must purchase gold in three months to use in its operations. Maverick's management has estimated that if the price of gold were to rise above $375 per ounce, the firm would go bankrupt. The current price of gold is $350 per ounce. The firm's chief financial officer believes that the price of gold wi
Consider a European call option on stock A that expires on December 21 and has a strike price of $50.00. a. If stock A is trading at $55 on December 21, what is the pay off to the owner on the option? b. If Stock A is trading at $55 on December 21, what is the pay off to the seller of the option? c. If stock A is trading at