Is the call in the money-speculative premium on call option

Assignment Help Financial Management
Reference no: EM13944559

Assume that a stock is selling for $47 with options available at 20, 30, and 40 strike prices. The 40 call option is at 7.5. Calculate the following: (a) The intrinsic value of the $40 call (b) Is the call in the money? (c) The speculative premium on the 40 call option. Please show all work.

Reference no: EM13944559

Questions Cloud

Evaluating the current performance of each of two companies : What ratios are most important in assessing current and predicting future value creation for Sears? For Wal-Mart? How useful are financial ratios in evaluating the current performance of each of the two companies
Act in the interest of existing shareholders : Assume you are the CEO of a company, MBA Inc, and you always act in the interest of existing shareholders. Your company has one asset, The Diploma, and one investment opportunity. The values of the asset and the opportunity depend on the state of the..
Is product more susceptible to supply elasticity : Supply & Demand - Using a product or service at your company, or one that you are familiar with, describe the various factors that impact its level of supply and demand in the marketplace. Is this product more susceptible to supply elasticity or d..
Capital budgeting and risk assessment : A detailed explanation of how the organization plans for capital budgeting and risk assessment. A detailed explanation of the social and environmental impacts of the activities and decisions of organization.
Is the call in the money-speculative premium on call option : Assume that a stock is selling for $47 with options available at 20, 30, and 40 strike prices. The 40 call option is at 7.5. Calculate the following: (a) The intrinsic value of the $40 call (b) Is the call in the money? (c) The speculative premium on..
Managing the implementation of new technology : Managing the implementation of new technology and working practices. Talk about the new technology that helped in improvement in daily life.
Discuss any three cultural theories : Discuss two to three theories in details with strength and weakness. Discuss any three cultural theories eg., Johnson and Scholes
Bonds at par with annual coupon rate : Last year Malko Enterprises issued 6-year bonds at par with annual coupon rate of 7.5%, payable semi-annually. These bonds currently sell for $1,050. Which of the following statements is incorrect?
Futures contract on grain : Given a 5,000 bushel futures contract on grain at a price of $2.75 per bushel, margin requirement is 5 percent, maintenance margin is 80 percent. What would the return on investment be if the price increases by $.06 per bushel?

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate the weighted cost of capital

Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying techniques for cost of capital for different divisio..

  What was the last quarterly dividend paid

You find a stock selling for $74.20 that has a dividend yield of 3.4 percent. What was the last quarterly dividend paid?

  Appropriate measure to use than net present value

Despite shortcomings of the internal rate of return in some situations, why do most financial managers use IRR along with NPV when evaluating projects? Is there a situation in which IRR might be more appropriate measure to use than Net present value?

  Aftertax salvage value

An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,020,000 and will be sold for $1,220,000 at the end of the project. If the tax rate is 35 percent, what is the aftertax s..

  Modified internal rate of return of future cash flows

Find the modified internal rate of return (MIRR) for the following series of future cash flows if the company is able to reinvest cash flows received from the project at an annual rate of 8.87 percent. The initial outlay is $306,000

  What is the additional year-three cash flow

You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,900.00, and it would cost another $1,970.00 to install it. What is the initial cash outla..

  Portfolio weights will decrease for the stocks in portfolio

Without trading, the portfolio weights will decrease for the stocks in the portfolio whose returns are above the overall portfolio return.The expected return of a portfolio is simply the weighted average of the expected returns of the investments wit..

  Examine the credit card loss rates and personal bankruptcy

Examine the credit card loss rates and personal bankruptcy filings in Exhibit 15.4. What might explain the increase in both measures after 1994 in a period when economic growth in the United States was strong and unemployment was low? Given the probl..

  Cost allocation on a piece of land if the original cost

How do I figure out cost allocation on a piece of land if the original cost was 250,000, market value is 300,000, net book value is 250,000, and offer to purchase is 300,000?

  Cross rate of japanese yen to british pounds

Suppose the exchange rate between U.S. dollars and Japanese yen is $1 US=¥ 79.1 JPY, and the exchange rate between the U.S. dollar and the British pound is $1 US = £0.64 GBP. What is the cross rate of Japanese yen to British pounds? (In other words, ..

  Nuclear research laboratory-contemplating leasing

You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $5,100,000, and it would be depreciated straight-line to zero ove..

  Prepare a balanced scorecard

Explore the need for organisations to calculate and manage performance against objectives, as well as the potential effectiveness of tools such as Balanced Scorecards and Strategy Maps as aids in this cause.

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd