What is the total cost of creating combination

Assignment Help Finance Basics
Reference no: EM133114077

Put Options on a stock are available with the following strike prices of $3.5, $4 and $4.5, with the same expiration dates in 3 months. Their prices are $0.2, $0.4 and $0.7, respectively.

Questions:

1) Explain how the options can be used to create a Butterfly Spread. Show the graph with all details (premium, strike price, payoff line, etc).

2) What is the total cost of creating this combination?

3) Construct a table showing all possible scenarios how profit varies at the exercise (at the maturity of options) with the following stock prices: $3, $3.7, $4.2 and $5

Reference no: EM133114077

Questions Cloud

Calculate discount factor for all 5 years : Consider the following par bond (ie coupon rate=yield): Maturity: 1 2 3 4 5 YTM: 5%; 4.5%; 4%; 3.5%; 3.2%
Explain the conflict of interest : a). Companies pay rating agencies to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated in the fi
Explain the conflict of interest : Do bond ratings agencies have any conflict of interest when they rate bonds? Clearly explain your answer.
Calculate the net present value and internal rate of return : Use Excel to calculate the net present value and internal rate of return in a format similar to the Computer Application spreadsheet shown in the chapter
What is the total cost of creating combination : Put Options on a stock are available with the following strike prices of $3.5, $4 and $4.5, with the same expiration dates in 3 months. Their prices are $0.2, $
Components of non-banking financial companies : Why are non-banking financial companies valuable to the financial system? Elaborate all the components of non-banking Financial Companies.
Estimation of cost of capital : Build a cash flow (both write-up and spreadsheet) for a project/investment in assets based on real case/observed case/own case. Write-up must be cut and paste t
What is the allowable depreciation on Evergreen property : What is allowable depreciation on Evergreen property in current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation
Financial crisis and financial system of a country : What are the interlinkages between financial crisis and financial system of a country? How does financial crisis affect the overall financial system elaborate w

Reviews

Write a Review

Finance Basics Questions & Answers

  What is forecasted eva for 2012

Research and development expenditures in 2010 and 2011 were 1,200,000 and 2,200,000 respectively. In calculating EVA, prior research and development will be capitalized and amortized assuming a three-year life.

  Determine the p value from regression analysis

Determine the P value from regression analysis with a t stat of 4.42 and 17 degrees of freedom. Calculate step by step by hand. No software to be used.

  Raw materials inventory journal entries

The balance in Sedona Company's raw materials inventory account was $110,000 at the beginning of September. Raw materials purchased during the month

  What was the 2008 operating income and net income

What was the 2008 operating income and net income? What was operating return on assets and return on equity? Assume that interest must be paid on all of the debt.

  Investor purchased some shares

On January 1 of this year, an investor purchased some shares at X per share to yield 12% convertible quarterly. Calculate X.

  Challenges inherent in financial statement analysis

Consider a healthcare organization with which you are familiar in the United States and discuss what are some of the problems or challenges inherent in financial statement analysis?

  The balance sheet

The asset-liability approach complements the expense-liability approach because the former is applicable to the balance sheet and the latter is applicable to the income statement.

  Draw six mean-standard deviation diagrams

Draw six mean-standard deviation diagrams, one for each of the six remaining pairs of subsidiaries in exercise 4.15. Mark the individual subsidiaries, the minimum variance combination assuming no short sales, and ABCO's return variance for a 50/50..

  Would you buy the sterilizer system

A medium-sized nonprofit company in a remote desert incurs a cost of $150 a month to bring bottle water to quench the thirst of its volunteers.

  Institutions offer a variety of similar services

Different financial institutions offer a variety of similar services, but with different levels of competence. What are some explanations for this?

  Calculate the film net income

Garden Pro Corporation has sales of $4,822,670; income tax of $469,107; the selling, general and administrative expenses of $235,103; deprecation of $320,460; cost of goods sold of $2,782, 500; and interst expense of $181,991. Calculate the film's..

  Describe the same marginal rate of substitution

Indicate whether each of the following statements is true, false, or uncertain, and justify your answer.

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