User Account

All Pages

Calculate net profit on the option contract

Assignment Help Finance Basics
Reference no: EM132412427

Question: You have purchased a call option contract on J & K common stock. The option has an exercise price of $27 and J & K's stock currently trades at $28. The option premium is quoted at $2.

a. Calculate your net profit on the option contract if J & K's stock price rises to $32 and you exercise the option.

b. Calculate your net profit on the option contract if J &KJ's stock price falls to $28.00 and you exercise the option.

c. If the stock price is $28.00, what would be the gain or loss if you exercise or not exercise the option.

d.  Based on your answers above would it be more profitable to exercise the option or not exercise the option?

Reference no: EM132412427

Questions Cloud

What is net profit on the option : What is your net profit on the option if UBR's stock price increases to $150 at expiration of the option and you exercise the option?
Design a matlab coding for the vibrational part : Design a matlab coding for the vibrational part (piezoelectric materail) works on high frequency and tharmal part (pyroelectric materail)
What is the percentage increase in the nav : What is the percentage increase in the NAV for this mutual fund?
Explain how learning about henrietta lacks story helped you : During Skloot and Deborah's meeting with Christoph Lengauer, Lengauer emphasizes the importance of Henrietta Lacks's contribution to science.
Calculate net profit on the option contract : Calculate your net profit on the option contract if J & K's stock price rises to $32 and you exercise the option.
What you might have done to prevent given from happening : Write a 525- to 700-word paper that identifies and evaluates the root cause for Medicare fraud in this case. Explain what you might have done to prevent.
Do you have a low tolerance for imbalance : Politics often asks us to support a candidate we don't always agree with, or only agree with a handful of their beliefs. Perhaps we like the candidate's.
What is the break-even point for the investor : Ignoring commissions, if the option was purchased for a price of $.85, what is the break-even point for the investor on the put and the call respectively?
Determining the current value of the account : The first 4 installments earned a nominal rate of 8%, the next 4, a nominal rate of 6%, and the last 4 we're at a nominal rate of 10%.

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculate the liquidity risk premium

The maturity risk premium is 0.65 percent on 5-year securities and increases by 0.05 percent for each additional year to maturity. Calculate the liquidity risk premium on Tom and Sue's Flowers, lnc.'s, 15-year bonds.

  Find what is the annual total costs of post card inventory

Post Card Depot, an large retailer of post cards, orders 4,325,690 post cards per year from its manufacturer. What is the annual total costs of post card inventory?

  What is the stocks expected rate of return

(Common stock valuation) Bristol Plc. has just paid a dividend of $1.5 per share per year. If the growth rate of dividends is 5 percent, calculate the value.

  Steeltech will purchase new equipment

SteelTech will purchase new equipment for $1,500,000. The additional micro-processors will be manufactured in a building SteelTech purchased eight years ago

  Discussed in the scenario could become a roadblock

From the scenario, cite your forecasting conclusions that support TFC's decision to expand to the West Coast market. Speculate as to whether or not the agency conflict discussed in the scenario could become a roadblock to your conclusions. Provide a ..

  Various components of internal control

What are the various components of Internal Control? How would I explain management's role in establishing a good internal control environment?

  What trading strategy will you recommend based your analysis

Estimate CAPM for each portfolio, and determine whether or not, you find any non-zero alpha that is significantly different from zero.

  Contradictions in woodrow wilson neutrality policy

Explain the contradictions in Woodrow Wilson's neutrality policy. What were the two challenges that would steer America towards war?

  Define the term lease

ABC Corp. is considering leasing an asset from XYZ Corp. Here are the relevant facts.

  What is the monthly return on this investment vehicle

Hopkins Insurance Co. is selling a perpetuity contract that pays $1,200 monthly. The contract currently sells for $100,000.

  Which project will the firm undertake in practice

IF the firms management makes its investments decisions in order to MAXIMIZE the cash flows to equity holders, which project will the firm undertake.

  A company wants to exports goods to france the goods costs

a company wants to exports goods to france. the goods costs eur 600000000 and payment will take place in one year. the

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd