Benefit from the time decay of the options premium

Assignment Help Financial Management

Reference no: EM132065223

1. Gugenheim, Inc., has a bond outstanding with a coupon rate of 6.2 percent and annual payments. The yield to maturity is 7.2 percent and the bond matures in 16 years. What is the market price if the bond has a par value of $2,000?

2. If you write a call, hoping to benefit from the time decay of the options premium, which one of the following measures would you use?

a. Theta, expressed in percentage

b. Theta, expressed in dollars

c. Delta, expressed in percentage

d. Delta, expressed in dollars

e. Gamma, expressed in percentage

3. You establish the following position: Short 1 ABCD 320 Put @ 6 If the delta of the put is 0.50 and the gamma is 0.03, what would the new delta be if ABCD decreases from 321 to 320?

a. 0.47

b. 0.50

c. 0.53

d. 0.56

e. 0.60

Reference no: EM132065223

Questions Cloud

If the yield to maturity is greater than the current yield : If the yield to maturity is greater than the current yield, then the bond offers the prospect of price appreciation as it approaches its maturity date.

Capital appreciation and capital preservation : Which investment objective(s) should your nephew pursue (capital appreciation, capital preservation)?

Structures yield the same amount of carried interest : For what amount of exit proceeds would these two structures yield the same amount of carried interest?

Raising the money directly from financial markets : How process of raising the $5 million would be different with assistance of financial institution versus raising the money directly from financial markets?

Benefit from the time decay of the options premium : If you write a call, hoping to benefit from the time decay of the options premium, which one of the following measures would you use?

Discuss the purpose of the cash conversion cycle : Discuss the purpose of the cash conversion cycle and its components. Analyze the results obtained in the cash conversion cycle equations.

What is the borrowing cost for this transaction : AA bonds are selling for 1.35 per cent above the 10-year Treasury bond rate. What is the borrowing cost for this transaction?

An increase in accounts payable results : An increase in accounts payable results in:

Capital budgeting criteria-mutually exclusive projects : Project S costs $11,000 and its expected cash flows would be $4,000 per year for 5 years. which project would you recommend?

User Account

All Pages