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a) Explain why a futures contract can be used for either speculation or hedging.
b) The current price of a stock is $94, and three-month call options with a strike price of $95 currently sell for $4.70. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2,000 call options (20 contracts). Both strategies involve an investment of $9,400. What advice would you give? How high does the stock price have to rise for the option strategy to be more profitable?
c) A futures contract is used for hedging. Explain why the daily settlement of the contract can give rise to cash flow problems.
How much would it cost you to buy this annuity if you want to earn a 5% rate of return and you expect an annual growth rate of 1%?
Explain how Stephanie should convince her mother that it is inappropriate to call the bank manager and his wife for assistance in getting the loan approval?
a. What are the APRs for the three investment options? b. Which investment options should you choose?
The finance department of a large corporation has evaluated a possible capital project using the NPV method, the Payback Method, and the IRR method. The analysts are puzzled, since the NPV indicated rejection, but the IRR and Payback methods both..
The following table lists returns on the market portfolio and on Scientific Atltanta, each year from 1989 to 1998.
The sales price is $1.50 per cup while the variable cost per cup is $0.60. How many cups of coffee must it sell to break-even on a cash basis?
Traditional finance texts often address behavioral finance as an extension of the concepts, principles, and theories of the discipline.
Easy-going company acquired some Plant at a cost of $1.5million. As at 30 June 2014 the plant had accumulated depreciation of $250 000.
Define logistics. What is meant by supply-chain management (SCM)? Describe how the two relate to each other (if at all). What are the elements of logistics? Briefly describe each. What is meant by logistics engineering? Define supportability?
Describe the various tax rate structures; how are they different and which do you propose for the various types of taxes?
1. What are redeemable preference shares and from what source can they be redeemed?
Calculate the required rate of return for XYZ Inc. using the following information:
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