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Retirement Options - Lump Sum Vs. Payments

A person is about to retire and must choose between three retirement plan options. One provides $55,000 per year for the renaubder of his life. Another provides 85% of this amount and increases by 5% each year. A third option gives him a $400,000 lump-sum settlement. If his remaining life expectancy is twelve years, the prime in

Hedging a possible translation loss using an option contract

A forward contract was used to establish a derivatives "hedge" to protect Centralia from a translation loss if the euro depreciated from ?1.1000/$1.00 to ?1.1786/$1.00. Assume that an over-the-counter put option on the euro with a strike price of ?1.1393/$1.00 (or $0.8777/?1.00) can be purchased for $0.0088 per euro. Show how

Business Ethics and Taking Sides

See the attached file. The Ford Pinto Case in Ch. 12 of Business Ethics and Issue 15: Was Ford to Blame in the Pinto Case? in Ch. 4 of Taking Sides. ? Write a 1,050- to 1,400-word paper in which you address the following: o If you were involved in the dilemma discussed in the case study, what solution would you recommend?

Calculating the NPV for the Project

Please help with the following homework problem 11-3: 1) Calculating the NPV for the project 2) What would be the NPV if the production is not sold? Any helpful tips will help. I have also attached the Excel worksheet I need to put my solutions into. See ATTACHED file(s) for complete details.

Cost of Options to Company

In 2004, an employee was granted 305 options on the stock of a firm with an exercise price of $20 per option. In 2009, after the options had vested and when the stock was trading at $35 per share, she exercised the option. The firm's income tax rate was 36 percent. What was the after-tax cost to shareholders of remunerating this

Hedging Strategy

Assume that you manage a $100 million stock portfolio of which 3% is comprised of GM stock and 3.5% is comprised of Ford stock. Assume that GM and Ford are the only automobile industry holdings in the portfolio. Assume that you are bearish on the automobile industry over the next six months and neutral to bullish on all other in

Here are the expected returns on two stocks:

____ 28. Here are the expected returns on two stocks: Returns Probability X Y 0.1 -20% 10% 0.8 20 15 0.1 40 20 If you form a 50-50 portfolio of the two stocks, what is the portfolio's standard deviation? a. 16.5% b. 10.5% c. 13.4% d. 8.1% e. 20.0%

Stocks: Examine trading volume for 5 companies and discuss sample differences

Look up the daily trading volume for the following stocks during a recent five-day period (please identify the five-day period chosen) JP Morgan Chase Wal-Mart Microsoft IBM Boeing Randomly select five stocks from the NYSE and examine their trading volume over the same five days. a) What are the average volumes f

Portfolio of common stock

Assume you hold a well balanced portfolio of common stocks. Under what conditions might you want to use a stock index (of ETF) option to hedge the portfolio? a) Briefly explain how such options could be used to hedge a portfolio against a drop in the market. b) Discuss what happens if the market does, in fact, go down c) What

Saunders Corporation

The data below apply to Saunders Corporation's convertible bonds. What is the bond's straight-debt value? Maturity: 10 Stock price: $30.00 Par value: $1,000.00 Conversion price: $50.00 Annual coupon: 6.00% Straight-debt yield: 8.00%

Conversion Ratio and Value

Lucky dog pet food has a 1,000 convertible bond outstanding with a conversion price of $18.00 per share. The bond pays an interest payment of $50 semiannually and matures in 20 years unless converted into common stock earlier or called by the company. Bonds of similar risk currently yield 12 percent. The common stock sells for $

Early Excercise vs. Selling a Call Option

Joan Junkus owns IBM call options expiring in 8 weeks. The strike price for her options is $80. The current stock price is $84.45 and the current market price for her option is $7.10. Would she be better off selling her options or exercising her options? Why?

Explain the basic concepts surrounding bankruptcy for call centers.

The law firm is very concerned that the call center would not be able to pay any judgment levied against it by the courts in a civil tort case. Due to recent robberies and legal troubles with the call center, the firm is worried that the call center although incorporated may have to file bankruptcy. Your firm is currently owed j

Accounting for Stock-Based Options: option compensation expense

The FASB in SFAS No. 123, "Accounting for Stock-Based Options." encourages (but does not require) companies to recognize compensation expense based on the fair value of stock options awarded to their employees and managers. Early drafts of this proposal required the recognition of the fair value of the options. But the FASB met

Study Guide 1

I need help with the attached. 1. Securities which could be classified as held-to-maturity are a. redeemable preferred stock. b. warrants. c. municipal bonds. d. treasury stock. 2. Unrealized holding gains or losses which are recognized in income are from securities classified as a. held-to-maturity. b. available-for

Markets and stocks

9 On average, the market compensates investors for taking a. Nondiversifiable, aka market risk b diversifiable risk c. Firm-specific risk d. None of the above 11 Since approximately 1900, historical evidence suggests that investing in common stocks has resulted in relatively high average annual returns with a. Rela

Amount of total compensation indicated by the options

Pastore Inc. granted options for one million shares of its $1 par common stock at the beginning of the current year. The exercise price is $35 per share, which was also the market value of the stock on the grant date. The fair value of the options was estimated at $8 per option. 42. (1) What would be the total compensation indi

Amount of equity increase after options are exercised

41. (1) Under its executive stock option plan, W Corporation granted options on January 1, 2009, that permit executives to purchase 15 million of the company's $1 par common shares within the next eight years, but not before December 31, 2011 (the vesting date). The exercise price is the market price of the shares on the date of

Question about Diluted Earning Per Share

I have attached an excel file to see the problem better. XX Corp. had $900,000 net income in 2004. On January 1, 2004 there were 220,000 shares of common stock outstanding. On April 1, 20,000 shares were issued and on September 1, Birney bought 30,000 shares of treasury stock. There are 30,000 options to buy common stock at $

Journal Entry for Bonds & Interest

Hello, I got halfway through this problem, but I am stuck on amortization on how it works. Can someone show me how to do this? Catt Co. issued $3,000,000 of 12%, 5-year convertible bonds on December 1, 2003 for $3,013,000 plus accrued interest. The bonds were dated April 1, 2003 with interest payable April 1 and October 1.

Stock, Foreign Currency, Exchange Rates

6.Which one of the following characteristics of preferred stock would make the stock resemble a liability? A)The preferred stock is callable. B)The preferred stock is convertible. C)The preferred stock has warrants attached. D)The preferred stock is noncumulative. E)The preferred stock is participating. 7.On Januar

Portfolio and Stocks

1. A portfolio consists of a T-bill with a face amount of $10,000 and 200 shares of Camel Corp stock priced at $60 a share. The T-bill matures after 1 yr, and its yield is 9.4%. The expected return on the stocks is 16%, with sigma of 22%. Find E(Rp) and σ(Rp) of the portfolio. The answer is E(Rp) = 13.15%, σ(Rp)= 12.49%.

Types of alternative investment vehicles and derivatives

1. What are the different types of alternative investment vehicles? 2. Which one is the most preferable? Why? 3. What are derivatives? 4. How can they be used to manage a portfolio? Would you personally use derivatives in your portfolio? Why or Why not? (at least 350 words).

Financial Options

Explain what options are and some of their uses. What is the difference between financial options and other kinds of options? What are real options, and what are they used for?

Stocks and Options: Calculate ORNE's option exercise value

The exercise price on one of ORNE Corporation's put options is $30 and the price of the underlying stock is $25. The option will expire in 25 days. The option is currently selling for $5.50. Calculate the option's exercise value? Calculate the value of the premium over and above the exercise value? What does this value

Call options on futures.

Call options on futures. DePaul Insurance Company purchased a call option on an S&P500 futures contract. The option premium is quoted as $6. The exercise price is 1430. Assume the index on the futures contract become 1440. Should DePaul exercise the call option or let it expire? What is the net gain or loss to DePaul after accou