What is the net profit and loss of the options

Assignment Help Financial Management
Reference no: EM13917697

What is the net profit/loss of the following options?

(1) A call option written on FB has an exercise price of $60 with a premium of $5. Currently FB is trading at $70 per share.

(2) A call option written on BAC has an exercise price of $20 with a premium of $2. Currently BAC is trading at $16 per share.

Reference no: EM13917697

Questions Cloud

Coupon bond paid annually with a face value : Your broker calls you up and tells you that she found a good deal on a bond. It's an 8% coupon bond paid annually with a face value of $1,000. It has 12 years until maturity. Using a discount rate of 7% what is the present value of this investment? I..
What is the yield to maturity on this bond : A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at an $84.52 discount from par value. What is the yield to maturity on this bond?
What is the bonds conversion premium : A convertible bond has a par value of $1,000, but its current market price is $950. The current price of the issuing company's stock is $19, and the conversion ratio is 40 shares. What is the bond's conversion premium?
Structure of interest rates becomes inverted : Assume the term structure of interest rates becomes inverted?, with short-term rates going to 14 percent and long-term rates 6 percentage points lower than short-term rates. Earnings before interest and taxes are $1,010,000. The tax rate is 30 percen..
What is the net profit and loss of the options : What is the net profit/loss of the following options? A call option written on FB has an exercise price of $60 with a premium of $5. Currently FB is trading at $70 per share. A call option written on BAC has an exercise price of $20 with a premium of..
What is its nominal annual rate of return : Preferred stock returns Bruner Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $2, and its current price is $80. What is its nominal annual rate of return?
Handout to accompany an oral presentation : Which of the following would be an appropriate handout to accompany an oral presentation?
Compounded continuously maturity : What are the prices of a call option and a put option with the following characteristics? Stock price = $73 Exercise price = $70 Risk-free rate of return = 4%, compounded continuously Maturity = 8 months Standard deviation = 49% per year.
Equation for valuation of a put option was derived : In class the equation for the valuation of a put option was derived. This is the expected value of the present value of the (nonnegative) payoff obtained in exercising the option. This is the Black-Scholes-Merton equation. Mimicking that derivation, ..

Reviews

Write a Review

Financial Management Questions & Answers

  Evaluate their various price sensitivities

A $20 Million 8-year bond pays 6.25% coupon with a 6% yield. Use the model to construct a 70% synthetic floater and 30% inverse-floater. The required synthetic has a 4% basis + 2% spread. Summarize your results including prices, price durations and c..

  What is the value of this stock today at a discount rate

Newcomer Mills is a relatively new firm which will retain all of its earnings for the next four years. Four years from now, the firm expects to pay its first dividend of $0.25 a share. After that, it intends to increase the dividend by 4 percent annu..

  Decrease the after-tax of debt for a firm

All else constant, which of the following will decrease the after-tax of debt for a firm?

  What is fairways cost of equity capital

Fairway Golf Corporation has a beta of 1.2. If the three-month Treasury bills currently yield 2.9 percent and the market risk premium is estimated to be 5.2 percent, what is Fairway’s cost of equity capital?

  Seed them with dry ice and silver iodine particles

The Russian air force is being called on this year to intercept storms advancing on Moscow and to seed them with dry ice and silver iodine particles. The idea is to make snow drop on villages in the countryside instead of piling up in Moscow.

  Competition amongst bond brokers causes bonds

Suppose that competition amongst bond brokers causes bonds to become more liquid. Using the liquidity preference model, show graphically how this will affect money demand and the nominal interest rate

  How much is the max exclusion from taxation on the gain

Jane has lived in her home 6 years got married last month gave her husband one half interest in home. if they sell the home next month how much is the max exclusion from taxation on the gain.

  Different account that pays compounded semi annually

Debra deposited $1000 five years ago in an account that paid 4% annually. But three years ago she moved her money to a different account that pays 5% compounded semi annually. How much does she have in her account now?

  Coupon bonds making semiannual payments

Backwater Corp. has 8 percent coupon bonds making SEMIANNUAL payments with a YTM of 7.2 percent and selling at $1060. How many years for these bonds have lefts until they mature?

  Describe the qualitative and quantities capital budgeting

Apple is considering a large capital investment in India. The project cash flows have been prepared in rippers, however, Apple plans to fund the entire investment out of its us dollar holdings. Describe the qualitative and quantities capital budgetin..

  Risk-free rate-what is the market risk premium

Porter Inc's stock has an expected return of 12.25%, a beta of 1.25, and is in equilibrium. If the risk-free rate is 5.00%, what is the market risk premium?

  The firm needs to plow back its earnings to fuel growth

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eight years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $16.50 per share 9 years..

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