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Put versus call option prices

OK, please correct me if I am wrong, but a put option is when your stock is sold automatically when the price drops below a certain level. a call is the option to purchase stock at a given price. If you have the amount that a put option would cost - how would you figure out what a call option would cost? 3 month put optio

International accounting questions

1 - Compare and contrast the terms translation, transaction, and economic exposure. Does FAS 52 resolve the issue of accounting versus economic exposure? 3. You are currently working for a consulting firm that provides risk management products for clients. You task is to provide your companies sales force with information on

Human Resource Management

Can you help me get started with this assignment? There are two parts (Assignment #1 and #2) and I need help with both, please. Case studies and BFOQ (Bona Fide Occupational Qualification) ******************************* Assignment #1 Case study - Towers Perrin and Hudson Institute Study - HR Executive Towers Perri

Exercise Value & Price

The exercise price on one of ORNE Corporation's call options is $30 and the price of the underlying stock is $35. The option will expire in 25 days. The option is currently selling for $5.50. a. Calculate the option's exercise value? b. What is the value of the premium over and above the exercise value? What does t

Option Prices and Binomial Model: What are the option's market value and the price of the stock? Find the price of a call option on the stock that has an exercise price of $21 and that expires in 1 year.

A. The exercise price on one Flanagan Company's options is $15, its exercise value is $22, and its premium is $5. What are the option's market value and the price of the stock? The textbook answers are $27 for the market value, and $37 for the stock price. B. The current price of a stock is $20. In 1 year the price will

Borrowing at Floating vs Fixed rate, Interest rate swap, Hedging alternatives

1. Two Lips, Limited, a Dutch bulb exporter, needs to borrow $40,000,000 for three years. They have the following alternatives: (a) Borrow for 3 years at 6.25% fixed rate. (b) Borrow at LIBOR + 1.75. LIBOR is currently 3.5% and will reset every six months over the life of the loan. (c) Borrow for one year at 4.75%. They would re

Understanding how options work

?Basic Principles of Stock Options o What are options and where do they come from? o Why are options a good idea? o Where and how are options traded? o What are the components of the option premium? o Where do profits and losses come from with options? ?Basic Option Strategies o How do you examine the risk and re

Hedge against risks

Demonstrate the use of derivatives as an appropriate hedging mechanism with international investment decisions.

CURRENCY OPTIONS: Use of call option for hedging

A hedger buys a call option on sterling for $0.06/£ at an exercise price of $1.80 per £. What is the worst exchange rate that can be achieved? Is that a sensible way for a hedger to consider an option?

Serving European Community Market

A small Canadian firm that has developed a set of valuable new medical products using its own unique biotechnology know-how is trying to decide how best to serve the European Community market. Its choices are as follows: 1) Manufacture the product at home and let foreign sales agents handle marketing. 2) Manufacture the pr

16:2. (Conversion of Bonds)

2. (Conversion of Bonds) Aubrey Inc. issued $4,000,000 of 10%, 10-year convertible bonds on June 1, 2004, at 98 plus accrued interest. The bonds were dated April 1, 2004, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2005, $1,500,000 of these bonds w

Currency speculation problems

Book used multinational business finance 10/e by david d eiteman Mexican peso futures US$/peso (CME) Maturity open high low settle change high low open interest Mar .10953 .10988 ,10930 .10958 ------ .11000 .09770 34,841

The Chineese Yuan and effects on Wal-Mart

The Chinese central bank maintained a firm peg of the yuan to the U.S. dollar at 8.27 yuan/$ from 1996 until July 21, 2005 when the yuan was revalued upward by 2.1%. At the same time the yuan became pegged to an undisclosed, trade-weighted basket of currencies. During 2003 and 2004 pressure had been building in the U.S. Congr

Pervasive Argument That is Win-Win

Provide a pervasive argument that is win-win for NECI that the Executive Team agrees that the CFO can hire a staff accountant immediately at $45,000 - $50,000 per year. (See attached files for full problem description).

Stock Problem

9.) The stock of Pills Berry Company is currently selling at $60 per share. The firm pays a dividend of $1.80 per share. a.) What is the annual dividend yield? b.) If the firm has a payout rate of 50 percent, what is the firm's P/E ratio? 11.) Ms. Queen is in a 35 percent marginal tax bracket. If Ms. Queen receives $3.80

New Employee Training Program: The Investment Environment

You have been asked to write a training document about the US Bond Market for use in the new employee training program. In your document, you must make sure to address each of the following: 1. the key players in the market; and the types of investments available to both individual investors and institutional investors,

Equity as an option: calculate value of equity and value of debt

A corporation's assets are currently worth $1,030. In one year, they will be worth either $1,000 or $1,300. The risk-free interest rate is 4%. Suppose they have an outstanding debt issue with a face value of $1,000. This debt is due in one year. a. The value of the equity is $____?. (Rounded to 2 decimal places.) b. The

Choices for using options to hedge against home purchase in one year.

Mr. and Mrs. Smith plan to buy a house in the near future. Their dream house costs $240,000 and will be available in a year. The Smiths currently hold $250,000 in 2,500 shares of Company A. Their financial advisor tells them that they have three options to preserve at best the value of their investment: (1) create a protecti

Futures & options

5. Suppose that the pension you are managing is expecting an inflow of funds of $100 million next year and you want to make sure that you will earn the current interest rate of 8% when you invest the incoming funds in long term bonds. How would you use the futures market to do this? 6. How would you use the options market to


Question #1 Which of the following is NOT true for the writer of a put option? a. the maximum loss is limited to the strike price of the underlying asset less the premium. b. the gain or loss is equal to but of the opposite sign of the buyer of a put option c. the maximum gain is the amount of the premium d. all of the ab

Stock Options

At the recent shareholders' meeting, the CEO of a small bank proposed a plan to offer each of its employees 250 incentive options for Class A common stock. The key provisions of the plan are that employees must exercise the options between January 2004 and December 2007, and if an employee terminates his or her employment with t

2 Problems

(See attached file for full problem description) --- 1. You are forming an equally weighted porfolio of stocks... 2. What spot and forward rates are embedded... ---

Risk and Return - Case Study

STOCKS A AND B The data that follow (and in file STOCK AB) give the rates of return over a 50-year period for two stocks, which we'll call stock A and stock B. The rate of return is defined as the increase in value of the portfolio (including any dividends or other distributions) during the year divided by its value at the b

Option and Warrants Part 1

4 Questions for you to familiarize with option and warrants, especially the Call/Put Parity, formula and relations. Question 1 Pintail's stock price is currently $200. A one-year American call option has an exercise price of $50 and is priced at $75. How would you take advantage of this great opportunity? Now suppose the op