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Jane bought some Company A shares at a price of $8.00per share and decides to construct a hedge using an equal number of call options with an exercise price of $7.50, and a cost of $1.00 per option. Required: Identify the hedging strategy used by Jane and calculate the profit per share for expiry share-prices of $7.00 and $10.00. Ignore the time difference between the purchase or sale of the option and its expiry.
When we analyze the “mix of classes of capital”, we might notice that some firms exhibit a “pecking order of financing”. Please evaluate this particular financial policy, and discuss its strengths and weaknesses. Would you more likely to recommend th..
What is the price of a T-Bond with exactly 24.5 years to maturity and coupons with rate 5.875% paid semi-annually? Its yield is 6.5% BEY (Bond Equivalent Yield is semi-annually compounded).
Albany Motors recently completed a 3-for-1 stock split. Prior to the split, the company had 10 million shares outstanding and its stock price was $150 per share. After the split, the total market value of the company's stock equaled $1.5 billion. Wha..
A firm has warrants outstanding for investors to purchase 50,000 shares at $25 per share. The current stock price is $40. The firm has l million shares outstanding and earnings per share of $1.50. What are earnings per share when all these warrants a..
Do convertible securities aggravate or ease potential conflicts between bondholders and shareholders?
Broussard Skateboard's sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $4 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as project..
Provide one reason for using the bank's investment portfolio to speculate on interest rate movements. Provide one reason against such a strategy. What do you believe about efficient markets, and how does this influence your opinion of speculating? Ca..
Identify the Notional Principal and the year by year cash flow arising out of the swap.
A bond was issued 2 years ago. It's original maturity was 20 years. The coupon rate is 4% and the current YTM is 6%. Compute its intrinsic value.
At the end of the mortgage, you must make a balloon payment; that is, you must repay the remaining balance on the mortgage.
The risk-free rate in the US is 1.42% and the risk-free rate in Mexico 3.57%. The dollar required return is 13%. Should the company make the investment?
In some ways, audit standards for entities other than public companies have become more stringent than Sarbanes-Oxley requires.
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