Reference no: EM133121347
Sarah and Ankit, who currently do not have a position in XYZ shares, expect that the price of XYZ share will increase in the next year. Consequently, Sarah buys one futures contract on 100 shares of stock XYZ, whereas Ankit buys one European call option on 100 shares of XYZ and writes (i.e., sells) one European put option on 100 shares of XYZ. Both options have the same expiration date of one year, the same exercise price of $45 (per share) and the same premium of $3 (per share). The XYZ futures contract has one-year to delivery, and the current futures price is $45. Suppose that the riskless interest rate is zero and that XYZ does not pay dividends. For simplicity, assume thatboth investors will sell the shares on the options' expiration day or futures' delivery day (That is, if Ankit exercises the call option, he will pay $4,500 for the 100 shares and immediately sell them. Likewise, if the put option is exercised by the buyer, Ankit would pay $4,500 for the 100 shares and immediately sell them. Similarly, Sarah will pay $4500, accept delivery of the shares and immediately sell them.)
a) Under what circumstances will the PUT be exercised? Under what circumstances will Ankit make a profit on the PUT? Under what circumstances will Ankit lose on the PUT?
b) Calculate the initial cash flow, the break-even stock price at expiration and the maximum profit and losses for each investor.
|
How much would need to be set aside now
: How much would need to be set aside now at 8% interest to pay the maintenance costs on the tractor for the first 6 years of ownership
|
|
Develop a new iphone15x
: 1. You are the financial analyst for Apple which is evaluating investing in a project to develop a new Iphone15X.
|
|
How much is the share premium on December
: If the employees choose the share alternative, the shares must be held for 2 years after the vesting date. How much is the share premium on December
|
|
What age can scott afford to retire
: Scott accumulated $1,015,000 as his retirement assets. He has determined that he will need $232,000 per year from the retirement assets to handle his living nee
|
|
What circumstances will the put be exercised
: a) Under what circumstances will the PUT be exercised? Under what circumstances will Ankit make a profit on the PUT? Under what circumstances will Ankit lose on
|
|
Demonstrate the procedure on a manikin
: Prompting questions and additional events, e.g. "the child is not breathing, what will you do now - Demonstrate the procedure on a manikin
|
|
What circumstances will yuan exercise her option
: Yuan and Irina, who currently do not have a position in XYZ shares, expect that the price of XYZ share will increase in the next several months. The current XYZ
|
|
What amount will be reported in Box A
: Constance's Québec payroll totals for the 2020 taxation year were as follows: salary of $24,100.00, What amount will be reported in Box A of her RL-1
|
|
How much money must be in the account
: How much money must be in the account 6 years from now assuming no other deposits or withdrawals?
|