What is the current intrinsic value of the option

Assignment Help Financial Management
Reference no: EM132029723

You purchase a put option on July Crude Oil with a strike price of $72/barrel. The premium on the option is $5/barrel. The July crude futures contract is currently trading at $70/barrel. The contract size for crude oil is 1000 barrels.

a. What is the current intrinsic value of the option?

b. What price must July Crude reach for you to break even if you exercise the option?

c. The price of July Crude decreases to $62 per barrel at the same time the premium for a July Crude put option increases to $10/barrel. What is your total profit or loss if you sell your option?

Reference no: EM132029723

Questions Cloud

Identity of the precipitate that forms when aqueous solution : Predict the identity of the precipitate that forms when aqueous solutions of the following substances are mixed.
Discuss the benefits of implementing cryptography : Write a paper with 2000 words explaining the benefits of implementing cryptography. Also explain the current technologies being used to achieve secure.
Standard curve with different measurements : Would this be a better method than doing the standard curve with different measurements. why or why not?
What is income elasticity of demand for health care visits : ECON 550 Homework. Suppose that Sara's income rises to $42,000. What is her income elasticity of demand for health care visits
What is the current intrinsic value of the option : What is the current intrinsic value of the option? What price must July Crude reach for you to break even if you exercise the option?
Are all major points illustrated adequately : Thoroughness: Are all major points illustrated adequately? Are there parts that need more explanation or evidence?
Calculate animal chin cost of preferred : Calculate Animal Chin’s cost of all debt and the after-tax cost of debt. Calculate Animal Chin’s cost of preferred.
Turning more confident on embattled economy : Showing that investors are turning more confident on the embattled economy.
Government deficit have on the price of securities : What effects would an increase in government deficit have on the price of securities?

Reviews

Write a Review

Financial Management Questions & Answers

  What is its self-supporting growth rate

Maggie's Muffins, Inc., generated $2,000,000 in sales during 2013, and its year-end total assets were $1,400,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..

  Between venture capital and conventional financing

Difference between venture capital and conventional financing

  Should the company buy or lease

Should the company buy or lease?

  Pay for edith health care and other expenses

Today she is at Edith's bank and will set up a deposit account so she can write checks to pay for Edith's health care and other expenses.

  What should the market price of this stock be

Tyler Industries stock traditionally provides a rate of return of 14.2 percent. The company just paid an annual dividend of $1.65 a share and recently announced it will commence increasing its dividends by 3.5 percent each year. For this stock to ret..

  Mortgage lenders base the mortgage interest rate

Mortgage lenders base the mortgage interest rate they offer you on your credit rating. This makes it financially critical to maintain a credit score of 700 or h

  Equity is currently selling-shares are outstanding

Suppose that Lil John Industries' equity is currently selling for $32 per share and that 2.5 million shares are outstanding.

  What rate of return will you earn on that bond

If you purchase a zero coupon bond today for $235 and it matures at $1,000 in 12 years, what rate of return will you earn on that bond?

  What happens afterwards what would be the journal entries

What happens afterwards What would be the journal entries for this?

  Publisher put into advertising and still break even

The world-famous discounter, Fernwood Booksellers, specializes in selling paperbacks for $7 each. The variable cost per book is $5. At current annual sales of 200,000 books, the publisher is just breaking even. It is estimated that if the authors' ro..

  All sources of long-term financing to the firm

The cost of capital represents the weighted average cost of all sources of long-term financing to the firm,

  What is the present value

If money is discounted at 8 percent, what is the present value of the $105,000?

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