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If Wal-Mart stock is currently selling for $55 per share. A January 50 put sells for $2 and a January 60 call for $3. If you purchase the 50 put and 60 call:
a. What is the breakeven stock price for this portfolio?
b. Plot the payoff and profit diagrams for this portfolio.
c. Discuss the pros and cons of this strategy.
During the year, the pound appreciates against the yen. Does this enhance or diminish the investor's return on the stock?
A holder of a negotiable instrument is: Stanley, who owes Milton money, indorses a check to him with the term "without recourse." The instrument later is dishonored. What liability does Stanley have on the instrument? Chris convinces Dion, who does n..
If a project has a net present value equal to zero, then:
You believe you will spend $40,000 a year for 20 years once you retire in 40 years. If the interest rate is 6% per year, how much must you save each year until retirement to meet your retirement goal?
Some companies like Nike and Southwest Airlines openly try to recruit couples. Do you think is a good idea? How would you feel working in a department with couple?
Fama’s Llamas has a weighted average cost of capital of 10 percent. The company’s cost of equity is 14 percent, and its pretax cost of debt is 8 percent. The tax rate is 38 percent. What is the company’s target debt−equity ratio?
Prepare a variable costing contribution format income statement for each year.
ABC Company has debt with a yield to maturity of 7%, a cost of common stock of 13%, and a cost of preferred stock 9%. The market values of its debt, preferred stock, and common stock are $10 millions. $3 millions, and $15 million, respectively, and i..
How would you set up a cost-benefit analysis of a program to reduce air pollution in a city? Indicate the items you would include as costs and benefits, and discuss the problems encountered in measuring these benefits and costs.
Your firm has a $250,000 bond issue outstanding. These bonds have a 7% coupon, pay interest annually, and have a current market price equal to 103% of face value. What is the amount of the annual interest tax shield given a tax rate of 35%?
A bank expects to raise $20 Million in new money if it pays a deposit rate of 8%, and $120 in new money if it was a deposit rate of 8.5%. The bank expects to earn 9.5% on all money that is receives in new deposits. What is the marginal cost of deposi..
Discuss the concept of a zero cost collar and its usefulness. With the aid of a suitable example, illustrate how it works. Compare the use of covered calls and protective puts to managing risk exposure to individual securities.
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