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
Put-Call Parity: What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?
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?
Options: intrinsic value of the call, leverage, expiration date, naked, cash flows, intrinsic value of the put, premium, covered call, in the money options, profit (loss) at expiration, strike price
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.
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
What are the risks and opportunities associated with options trading for mutual funds, pension funds and individual investors?
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."
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
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
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
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
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
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?
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?
20. The following information is related to the pension plan of King, Inc. for 2008. Actual return on plan assets $200,000 Amortization of unrecognized net gain 82,500 Amortization of unrecognized prior service cost 150,000 Expected return on plan assets 230,000 Interest on projected benefit obligation 362,500 Service cost
1. Profitability and solvency objectives in business are: a. secondary to the objective of growth b. complementary objectives c. of primary importance in most businesses. d. generally ignored by established businesses. 2. As a company's prospects change over time, the ratings of its outstanding bonds: a. would tend to de
9. (a) What are the reasons for the existence of monopoly? (b) Which of these did Alcoa use to establish and retain a monopoly? Problem 1 If the market demand and supply functions for pizza in Newtown were: QD = 12,000 - 1,000P QS = -4,000 + 1,000P Determine algebraically the equilibrium price and quantity of pizza.