User Account

All Pages

Calculate the breakeven point of the option entered

Assignment Help Financial Accounting
Reference no: EM133002301

Question - Gerry believes that Pump Ltd is expected to rise in the next few months due to unprecedented demand as a result of recent floods. Gerry does not currently have the cash flow required to buy the share but finds a European call option with an expiry of 2 months, an exercise price of $40 per share and a premium of $2.25 per share. The current share price of Pump Ltd is $35.00.

(a) Should Gerry buy or sell a put or call option in order to benefit from the expected rise in the share price of Pump Ltd.

(b) Explain when Gerry would exercise the option.

(c) Calculate the breakeven point of the option entered into by Gerry, and the profit/loss if at expiry the Pump Ltd share price is $37 and $45 respectively.

Reference no: EM133002301

Questions Cloud

Calculate the present value of a loan : Calculate the present value of a loan that could be cleared by payments of $3,300 at the end of every 6 months for 8 years if money earns 7.71%
What is sustainability reporting : What is sustainability reporting? Briefly explain how both the Global Reporting Initiative (GRI) and Integrated reporting
Describe all of the search terms that the authors used : Describe all of the search terms that the authors used. (For example, these may be batterers programs, spouse abuse treatment, effectiveness studies
What is the amount of the initial cash flow : The old machine can be sold today for $50,000. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year 0
Calculate the breakeven point of the option entered : Calculate the breakeven point of the option entered into by Gerry, and the profit/loss if at expiry the Pump Ltd share price is $37 and $45 respectively
Prepare the appropriate journal entries : Prepare the appropriate journal entries when the amounts are paid to the Australian Taxation Office (ATO) and the medical fund on Monday
Identify three ratios : Identify three ratios above that may indicate going concern risks or increased risk of material misstatement in the accounts
BUSA3015 Business Forecasting Assignment : BUSA3015 Business Forecasting Assignment Help and Solution, Macquarie University - Assessment Writing Service
Determine effects of changes in foreign exchange rates : Determine, according to IAS 21: The Effects of Changes in Foreign Exchange Rates, the impact of the above transaction on the profits of Global Incorporation

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

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