What is total profit or loss on the option investment

Assignment Help Financial Management

Reference no: EM13877917

1. Suppose you purchase a call option on 100 shares of XYZ stock for $6 per share. The option has an exercise price of $40 per share and the stock is currently selling for $50 per share. What is your total profit or loss on the option investment?

2. Suppose the option in the previous question is a put rather than a call. All of the values stated are the same for the put option. What is your total profit or loss on the option investment?

Reference no: EM13877917

Questions Cloud

The cost of equity and flotation costs : Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 10%, paid annually. The tax rate is 35%. If the flotation cost is 5% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shiel..

In order to decide upon a corporate stock investment : In order to decide upon a corporate stock investment, most analysts would first perform a industry analysis. What is an industry and why is this step important? Make sure to discuss the potential problems with defining an appropriate industry for com..

What is an industry and why is this step important : In order to decide upon a corporate stock investment, most analysts would first perform a industry analysis. What is an industry and why is this step important? Make sure to discuss the potential problems with defining an appropriate industry for com..

Investment will result in additional cash flows : McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $817,500, and $1,200,000 over the next three years. What is the payback period ..

What is total profit or loss on the option investment : Suppose you purchase a call option on 100 shares of XYZ stock for $6 per share. The option has an exercise price of $40 per share and the stock is currently selling for $50 per share. What is your total profit or loss on the option investment?

What the pension fund should be to finance our retirement : We want to retire in 30 years, and we shall need $50,000 income per annum during our retirement which wills last 20 years. We can save $10,000 annually during the first 10 years. We would like to know what the pension fund should be to finance our re..

The variance of return on the portfolio : A portfolio is comprised of two stocks, A and B. Stock A has a standard deviation of return of 5% while stock B has a standard deviation of return of 15%. The correlation coefficient between the returns on A and B is .2778. Stock A comprises 40% of t..

Calculate your monthly principal and interest payment : If you want to take out a 30 year, $250,000.00 mortgage at 5.5% with 2 points. calculate your monthly principal and interest payment?. what is the APR and EAR (actual/true/effective rate of interest) on the loan? Show work

Expected return on the complete portfolio : The return on the risky portfolio is 18%. The risk-free rate as well as the investor's borrowing rate is 10%. The standard deviation of return on the risky portfolio is 20%. If the standard deviation on the complete portfolio is 25%, the expected ret..

User Account

All Pages