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Suppose you purchase 100 shares of a common stock at $25 and you want to protect its downside price risk. You bought a put option for months with a strike price of $25. (a) After some time, price of common stock goes to $50 and you want to exercise the put, what is the profit/loss from the put option? Draw the pay-off diagram? (b) After some time, the price of common stock goes down to $10, what is the value of put option? Draw the pay-off diagram?
Sprockets sell for $5 and have fixed costs of $1 million per year and variable costs of $2 per sprocket. What is the minimum number of sprockets the company must manufacture annually to not lose money? Solve using excel functions.
Prepare a Sensitivity risk analysis with three variables of your choosing. Your margins of variance are plus/minus 10%, 20%, 30%.
What is the expected dividend per share for each of the next 5 years?
Explicate how ERS can be misleading in expressing performance in the aforementioned case.
What are externalities? Think of positive externalities and negative externalities. How do externalities affect the persons’ (economic agents’) decision making and behavior? – Present your idea.
Warrents give bond investors the chance to profit from the firm's upside potential, leading some to compare warrants to a long-term call option. However, some factors distinguish warrants from call options. Exercising warrants can lead to the dilutio..
A put option on a stock with a current price of $32 has an exercise price of $36. The price of the corresponding call option is $2.5. According to put-call parity, if the effective annual risk-free rate of interest is 5% and there are three months un..
A share of stock will pay a dividend of $1.1 one year from now, with dividend growth of 4.4 percent thereafter. According to the constant dividend growth model, if the required return is 14.7 percent, what should the value of the stock be 2 years fro..
If all 25 buyers take the discount, how much potential revenue did BSI miss out on? Should they view this strictly as a loss on revenue?
Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at rd = 12%, and its common stock currently pays a $3.75 dividend per share (D0 = $3.75). What percentage of the company's capital structure consists of d..
Provide a discussion of the signals sent by a company’s announcement to increase dividends. Provide a discussion of the signals sent by a company’s announcement to issue new shares.
A stock that sold for ?$36 per share at the beginning of the year was selling for ?$42 at the end of the year. If the stock paid a dividend of ?$2.35 per? share, what is the simple interest rate on the investment in this? stock? Consider the interest..
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