User Account

All Pages

Exercise price of an option is fixed

Assignment Help Financial Management
Reference no: EM131062949

1. It is April and a trader buys 100 September put options with a strike price of $21. The stock price is $17.2 and the option price is $4.44. At the expiration, the stock price becomes $18.8. Calculate the option profit to the trader.

2. When one buys an option, he has to find another trader who wants to write the option. True False

3. ________ is tranches created from a pool of mezzanine tranches. ABS ABS CDO Synthetic CDO Credit Default Swap

4. 2 months ago, you paid $7 for a put option with a strike price of $30. The put option expires today and the stock price is $22. You should exercise because the stock price is lower than the strike price. True False

5. Lehman Bros went bankrupted in 2008 financial crisis. True False

6. BBB-rated ABS CDOs have the same riskiness as BBB-rated ABSs. True False

7. It is July and a trader buys 100 December call options with a strike price of $26. The stock price is $26 and the option price is $5.5. At the expiration, the stock price becomes $31.64. Calculate the option profit to the trader.

8. Which is a right to sell a stock at a strike price on a maturity date? European call option American call option European put option American put option

9. Exercise price of an option is fixed. True False

Reference no: EM131062949

Questions Cloud

What is the price of call option with the same strike price : A put option is currently selling for $5.7. It has a strike price of $50 and seven months to maturity. The current stock price is $57. The risk-free rate is 4.6 percent, and the stock will pay a $2.7 dividend in two months. What is the price of a cal..
What is current value of the bond and effective annual rate : You want to earn a real rate of return of 3.64 percent at a time when the inflation rate is 2.84 percent. What is the approximate nominal rate which you must earn? A $40,000 face value bond matures in 64 days and has a bank discount yield of 4.5 perc..
Five-year project has an initial fixed asset investment : A five-year project has an initial fixed asset investment of $295,000, an initial NWC investment of $27,000, and an annual OCF of −$26,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
Current dollar price of security-effective annual rate : A two-year STRIPS sells at an interest rate of 3.84 percent and a three-year STRIPS sells at a rate of 3.97 percent. What is the implied one year interest rate two years from now? Assume the rates are effective annual rates. A $50,000 face value STRI..
Exercise price of an option is fixed : It is April and a trader buys 100 September put options with a strike price of $21. The stock price is $17.2 and the option price is $4.44. At the expiration, the stock price becomes $18.8. Calculate the option profit to the trader. When one buys an ..
Prepare statement of retained earnings for the year : Retained Earnings Statement Rolt Company began 2013 with a $135,000 balance in retained earnings. During the year, the following events occurred: The company earned net income of $85,000. A material error in net income from a previous period was corr..
What is the risk premium on common stock : Foster Company calculation risk premium on its Common stock. What is the risk premium on common stock? Current price per share of common $50.00 Expected Dividend per share next year $3.00 Constant annual dividend growth rate 9% Risk-free rate of retu..
What is the difference between these two WACCs : Sapp Trucking's balance sheet shows a total of noncallable $45 million long-term debt with a coupon rate of 7.00% and a yield to maturity of 5.30 %. This debt currently has a market value of $50 million. The CFO thinks the WACC should be based on mar..
Formulation of the basic time value of money formula : Complete each of the following problems, and be sure to show your work with the appropriate formulation of the basic time value of money formula. Irrigated farmland in Phillips County has been selling at $6,000 per acre. If this farmland is expected ..

Reviews

Write a Review

Financial Management Questions & Answers

  Mutual fund tracking-expiration date-strike price-quality

A $1 billion mutual fund tracking the s&p 500 index. The index currently trades at 2000. In order to protect the fund against an index decline beyond 10% in a year. ie, the value of the fund in a year mush be above 900m. What forward or option positi..

  What amount will be in your account at end of four years

Quantitative Problem 1: You plan to deposit $2,200 per year for 4 years into a money market account with an annual return of 2%. You plan to make your first deposit one year from today. What amount will be in your account at the end of 4 years? Assum..

  What is the current yield on the bond

A bond has a coupon rate of 3.375%, pays coupons semiannually, and has a maturity of 5 years. What is the current yield on the bond? Assume that one year has passed and that the yield to maturity is 6%, what is the value or cost of the bond.

  What is the current market price of bonds

What is the future value of $950 paid on the last day of each 6 months for 12 years assuming an interest rate of 11 percent compounded semiannually - What is the current market price of these bonds?

  What is the NPV of the worst case scenario

You are considering a new product launch. The project will cost $925,000, have a six-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected to be $1,800,000; variable cost per unit will be 60% of sales; and f..

  Financial planning you wish to purchase new car

As part of your financial planning you wish to purchase q new car exactly 7 years from today . The car you wish to purchase costs 14000 today and your research indicates that it's price will increase by 3% to 6% per year over the next 7 years.

  What was clantons gross profit margin

In 2002 Clanton, Inc. had a gross profit of $27,000 on sales of $110,000. Clanton's operating expenses for 2002 were $13,000, and its net profit margin was .0585. Clanton had no interest expense in 2002. What was Clanton's gross profit margin for 200..

  What will be the new portfolio beta

You have a portfolio with a beta of 1.59. What will be the new portfolio beta if you keep 86 percent of your money in the old portfolio and 14 percent in a stock with a beta of 0.58? (Do not round intermediate calculations and round your answer to 2 ..

  What will the present value of his portfolio

Elliot makes $250,000 a year and pays 30% taxes on $150,000 and 35% on his remaining salary. His expenses are $110,000 (per year). He wants to invest a fixed amount EVERY day into an investment fund for 5 years and he hopes to get a 12% return. What ..

  How much should save each month

Sarah wants to go buy a house in Hawaii 15 years from now. She estimates she'll need $400,000 at that time to make this purchase. She plans to save each month at the end of the month for the next 15 years, and invest it at a rate of 8% a year, compou..

  Important factors for making a capital structure decision

What important factors, in addition to quantitative factors, should a firm consider when it is making a capital structure decision? How do these factors play in the decision?

  What is the annual equivalent of cost

Ten years ago, Jacobson Recovery purchased a wrecker for $290,000 to move disabled 18-wheelers. He anticipated a salvage value of $30,000 after 10 years. If the annual M&O cost was $25,000 the first year and increased by a constant $1000 per year wha..

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