Define lump-sum tax and price-distorting tax

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Reference no: EM132021241

1. You bought a call option on WMT with a strike price of $82.50 and a call premium of $1.60. The stock price at expiration is $85.50. What is your profit or loss?

2. Define a lump-sum tax and a price-distorting tax. Compare and contrast the two types of taxes. Explain what effect each type of tax has on the consumer.

3. An investment will pay you $226 two years from now, $684 four years from now and $1561 five years from now. You are going to reinvest these cash flows at a rate of 10.20% per year. What is the future value of this investment at the end of year five?

Reference no: EM132021241

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