Consider a European call option on Stock A that expires on December 21 and has a strike price of $50. a. If Stock A is trading at $55 on Dec. 21, what is the payoff to the owner of the option? b. If Stock A is trading at $55 on Dec. 21, what is the payoff to the seller of the option? c. If Stock A is trading at $45 on Dec.
What are the risks and opportunities associated with options trading for mutual funds, pension funds and individual investors?
Explain the differences between futures and option contracts. Which derivative can be assessed "less risk"?
To get started on your portfolio project, you first need to develop an investment plan. Your plan should outline your investment strategy. Be sure to include as part of your plan objectives and strategies (types of assets, limitations, allocations, sources and so on). This policy will be used to guide your portfolio management p
Could you give me a specific business example of this: " Utilitarianism does an analysis of each situation that allows them to help choose a course of action which provides least harm as compared to other alternatives. This is in hope that it is a win-win situation for everybody in the organization."
Peterson Securities recently issued convertible bonds with a $1,000 par value. The bonds have a conversion price of $40 a share. What is the convertible issue's conversion ratio?
A stock is worth $20 today, and it may increase or decrease $5 over the next year. If the risk-free rate of interest is 6 percent, calculate the market price of the at-the money put and call options on this stock that expire in one year. Which option is more valuable, the put or the call? Is it always the case that a call option
1. Assume the following financial data: Short-term assets . . . . . . . . . . . . . . . . . . . . . $200,000 Long-term assets . . . . . . . . . . . . . . . . . . . . . . 350,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . $550,000 Short-term debt . . . . . . . . . . . . . . . . . . . . . . . $100,000
Spears Co. will receive SF1,000,000 in 30 days. Use the following information to determine the total dollar amount received (after accounting for the option premium) if the firm purchases and exercises a put option: Exercise price = $.63 Premium = $.02 Spot rate = $.60 Expected spot rate in 30 days =$.
Here are some hypothetical returns during the past seven years on a market portfolio of common stocks and a portfolio of treasury bills. Year Common Stocks Treasury Bills -7 32.4% 11.2% -6 -4.9%
You are concerned that the stock market will decline over the next year, so you are considering buying a one-year put option on the S&P 500 Index. Assume that the Index has a value today of 1,400. One year from now, it will be either 1,800 or 1,000. The put option has an exercise price of 1,200. The risk-free rate is 5%. (N
Assume that a stock will be worth either $20 or $10 one year from now. A one-year call option on the stock, with an exercise price of $15, is worth $3 today. A one-year put option on the stock, with an exercise price of $12, is worth $0.50 today. What is the current stock price?
Dundr, Inc. an American firm, has receiveded an order from a Japanese firm for machinery priced at Yen100,000,000. This amount will be received by Dundr in three months. The following additional information is available (in addition to ft.com exchange rate quotes for April 9) Compare the following alternatives with res
What are some examples of sources of capital available to corporations? Describe how a corporation raises short term and long term capital through the US financial system.
1. Given the following: S=$68, C=$15, Rf =10%, X=$60, and time to maturity of call = 3 month. a. What is the value of a put with the same characteristics as the call above? b. Suppose that the put in part "a" is trading for $ 3.00: Indicate clearly the transactions you should undertake in order to create a risk-free arbitrage
1. Speculation: Diamond Bank expects that the Singapore dollar will depreciate against the dollar from its spot rate of $.43 to $.42 in 60 days. The following interbank lending and borrowing rates exist: Lending Rate Borrowing Rate U.S. dollar 7.0% 7.2% Singapore dolla
a. Why is it important to keep paid-in capital separate from earned capital? b. As an investor, is paid-in or earned capital more important? Why? c. As an investor, are basic or diluted earnings per share more important? Why?
Why do companies offer stock options? Should stock option compensation be included as an expense when calculating an organization's net income? Why or why not? If so, how should the amount of expense be calculated?
As compensation for helping start the import business, I have been offered 100 shares of stock under a stock option plan. I exercised these options recently at $45 when the market price was $60. I was interested in how the stock option program will affect my Corporation. Include the following in your answer: ? Discuss the tw
1. Suggest two areas where the use of futures contracts are most common. What percent of the value of the underlying security is typical as a down payment in a futures contract? 2. You buy a stock option with an exercise price of $50. The cost of the option is $4. If the stock ends up at $56, indicate whether you have a
Foreign stocks have been doing very, very well. The US recognizes that and buys into foreign stocks and mutual funds. Then a day happens when they get a major hit. Does this tell us our Global Business ventures are risky?
Swaps and other Derivatives 1. Coffman & Tony Inc. can borrow at 13 percent in the long-term capital market (fixed rate) or can borrow at London Interbank offer rate (LIBOR) plus 75 basis points in the Eurodollar market. Jim & Pfeiffenberger Inc. can borrow at 12 percent in the capital market long term (fixed) or can borrow a
See attached file for full problem description. On the last day of October, Brice Jones buys 200 shares of Olivia Corporation common stock selling 39.25 per share and is also considering the purchase of an Olivia option. Option Strike EXP Vol. Last vol. last Olivia 35 Dec 1,629 3.75 2,703 1.25 39.25 35 Mar 6,333 5
Six years ago, Corporation granted a nonqualified stock option to employee to buy 5,000 shares of Rollo stock at $15 per share for six years. At the date of grant, Corp. stock was selling on the AMEX for $14.75 per share. This year, employee exercised the option when the price was $45.10 per share. a. How much compensation i
You decide to sell 240 shares of Topgun enterprises Inc short when it is selling at is yearly high of 64.60. your broker tells you that your margin requirement of 60 percent and that the commission on the sale is 5 percent of the total stock value. While you are short, Topgun pays a 2.20 per share dividend. At the end of one ye
Please help with the following finance-related problems. a. Use options pricing model to calculate the theoretical value of a 12-month Call Option on the British Pound with a strike price of $1.65 per pound. b. Use same model to calculate the theoretical value of a 1-month Put Option on the Japanese Yen with a strike pr
What are the best ways to choose stocks for purchase recommendation to investment clubs that have a "buy and hold" philosophy of investment?
Mr. Nash holds an American put option on Delta Triangle, a non-dividend-paying stock. The strike price of the put is $40, and Delta Triangle's stock is currently selling for $35 per share. The current market price of the put is $4.50. Is this option correctly priced? If not, should Mr. Nash buy or sell the option in order to tak
What is the difference between an American option and a European option?
Your stock broker suggests you concentrate your portfolio on stocks with low P/E ratios. She explains that these firms are likely to be out of favor with investors, because they have a low price relative to their current earnings. Is this necessarily a good investment practice? Why or why not?