Call options on microsoft stock

Assignment Help Financial Management
Reference no: EM131878473

Suppose you buy call options on Microsoft stock. Each option is an American option that costs $2 and has a strike price of $40 and an expiration date of July 1. Discuss whether you would exercise the options in each of the following situations below. You must also provide an explanation to justify your actions.

A. It is March 1, and Microsoft’s stock price is $30.

B. It is March 1, and the stock price is $40.10.

C. It is March 1, and the stock price is $50.

D. It is June 30, and the stock price is $50.

E. It is June 30, and the stock price is $40.10.

Reference no: EM131878473

Questions Cloud

Risk management for personal financial plan : Insurance plays a big role in risk management for a personal financial plan.
What is the coupon rate of bond : The bond pays annual coupons and the next coupon is due in one year. What is the coupon rate of the bond?
Compute macaulay duration and modified duration : Compute Macaulay’s Duration (MD in years) and Modified Duration (D* in years), using the Present Value of Cash Flow method as demonstrated in class.
How much money do you have if you hold bond to maturity : If you can reinvest coupons at a rate of 4.5 % per annum, then how much money do you have if you hold the bond to maturity?
Call options on microsoft stock : Suppose you buy call options on Microsoft stock. Discuss whether you would exercise the options in each of the following situations below.
How much money would you have in your portfolio : By the time of your retirement, how much money would you have in your portfolio?
The appropriate building capitalization rate : If the appropriate building capitalization rate is 14% and the land capitalization rate is 10%, the the highest and best use of the site is
The abnormal return in an event study is described : The abnormal return in an event study is described as the:
David bowie bonds pay their coupons from royalties generated : David Bowie bonds pay their coupons from royalties generated by sales of David Bowie's past recordings.

Reviews

Write a Review

Financial Management Questions & Answers

  What is your annualized return

Assume you buy a share of stock at $40, it pays ?$1.18 in? dividends, and you sell it 241 days later for ?$32. What is your annualized? return?

  What will be the suggested price per share

Assume that a share of stock will pay dividends of $2 in one year, $3 in two years, and $3.50 in three years. For all years after year 3, dividends will grow at a rate of 5%. If shareholders’ required rate of return is 15%, what will be the suggested..

  What is the market value of a three year variable rate

What is the market value of a three-year variable rate loan where the variable rate is set as the arithmetic average of this period rate and last period rate?

  Company has option of building warehouse now

A company has the option of building a warehouse now or building it three years from now.

  Applying for mortgage

When applying for a mortgage, find one that allows you to be able to pay more money than the required monthly payment.

  Purchasing of medicines already on the market

What negative impact did Martin Shkreli's practice of reverse mergers and purchasing of medicines already on the market, only to sell them at higher prices have?

  Advantages of direct ownership of property and liquidity

All of the following are advantages of direct ownership of property as a way of investing in real estate except: "Liquidity" refers to:

  What is the price of a share of the stock today

LE Inc. is experiencing a period of rapid growth. Earnings per share is expected to grow at a rate of 12 percent during the next three years, 10 percent in the fourth year, 7 percent in the fifth year, and at a constant rate of 3 percent thereafter. ..

  What is the estimated cost of capital

You have been asked to calculate the cost of capital for a company with the following information. The company has $7,500,000 in face value bonds, trading at 96.5% of face value. The YTM on these bonds is 5.75%. The equity beta is 1.75, the expected ..

  Calculate the expected value of losses and variance

Calculate the Expected Value of Losses, Variance, Standard Deviation and Coefficient of Variation. Calculate mean or expected loss, Standard deviation, Coefficient of variation and In what range should theft losses fall 99 percent of the time?

  What would be the cost of the new equity

Banyan Co.'s common stock currently sells for $43.00 per share. The growth rate is a constant 8.4%, and the company has an expected dividend yield of 2%.The expected long-run dividend payout ratio is 30%, and the expected return on equity (ROE) is 12..

  What would be the fair forward price for this contract

S&P 500 index has a dividend yield of 3% today. The current index is trading at $1800 and the risk-free interest rate is 5% per annum with continuous compounding. An investor would like to enter into a short one-year forward contract on the index. Wh..

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!

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