Differences between futures contracts and options contracts

Assignment Help Financial Management

Reference no: EM131933707

1. A firm is evaluting a new machine to replace an existing, older machine. the change in depreciation is $3,000. the firm's marginal tax rate is 30 percent.

a. Depreciation does not affect the calculation of the supplemental operating cash flow.

b. Depreciation is added to the net income to calculate the supplemental operating cash flow.

c. depreciation expense is added to the intial outlay incurred to purchase an asset.

d. depreciation is deducted from the terminal cash flows from an asset.

2. Which of the following is NOT among the differences between futures contracts and options contracts?

a. Futures give the obligation, while options give the right to buy or sell.

b. Futures require no premium, while options premium are required.

c. Options have the “Do not exercise” choice to get out of the contract, while futures do not.

d. You can take a short position by buying futures contracts or buying a put option.

e. All of the above are among the differences between Futures and Options contracts.

Reference no: EM131933707

Questions Cloud

The variability of the security market price : The higher the call option premium, other things being equal, ______________ the variability of the security’s market price.

Recently signed a contract to sell pharmaceutical products : DLK (U.S.A.) recently signed a contract to sell pharmaceutical products to Apex Medicals, a Malaysian distributor of drugs, for MYR 40,000,000.

Required rate of return for envoy common stock : what is the required rate of return for Envoy's common stock, which carries a beta of 1.35?

What is the amount of total taxes paid : The tax rate on corporates os 35% and dividends is 10%. What is the amount of total taxes paid? Please explain step by step. Details.

Differences between futures contracts and options contracts : Which of the following is NOT among the differences between futures contracts and options contracts?

Value from old shareholders to new shareholders : What will be the transfer of value from the old shareholders to the new shareholders?

What is dividend yield : What is the price of its stock today? What is the price of its stock a year from now? What is the dividend yield?

Put-call parity and total cost of the straddle : What would be a simple options strategy to exploit your conviction about the stock price’s future movements?

What is lump sum needed to fund retirement : What is the lump sum needed to fund retirement, at an expected annual return of 11.2%?

User Account

All Pages