What is your net profit on the option

Assignment Help Financial Management

Reference no: EM131061197

You have purchased a put option on Pfizer common stock. The option has an exercise price of $44 and Pfizer’s stock currently trades at $46. The option premium is $0.50 per contract.

a. What is your net profit on the option if Pfizer’s stock price does not change over the life of the option? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

Net profit $ per share

b. What is your net profit on the option if Pfizer’s stock price falls to $40 and you exercise the option? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

Net profit $ per share

Reference no: EM131061197

Questions Cloud

Calculate the aftertax cash flows for first year for bond : Suppose your company needs to raise $35 million and you want to issue 20-year bonds for this purpose. Assume the required return on your bond issue will be 8 percent, and you’re evaluating two issue alternatives: How many of the coupon bonds would yo..

What is the variance of the returns on rtf : The following probability distribution refers to expected outcomes for RTF, Inc. under two economic states: What is the variance of the returns on RTF?

Identify two methods needed to avoid restriction limits : "The Financial Plan" Please respond to the following: Identify at least two methods needed to avoid restriction limits. Discuss the major challenges that you believe the public will encounter as a result of the proposed budget.

What is the stock expected price three years : $35.50 per share is the current price for Foster Farms' stock. The dividend is projected to increase at a constant rate of 4.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock's expected price 3 years from today?

What is your net profit on the option : You have purchased a put option on Pfizer common stock. The option has an exercise price of $44 and Pfizer’s stock currently trades at $46. The option premium is $0.50 per contract. What is your net profit on the option if Pfizer’s stock price does n..

Identify three u.s. foreign policy issues : Identify three U.S. foreign policy issues and why you support or oppose them. You can use information from the lectures, the textbook Chapter on Foreign Policy, the attached reading from Michael Parenti, and also information from the film clips a..

What would you expect to be the stocks price : A company has just paid a dividend of 4.1$. Its discount rate is 9.9%, and the expected perpetual growth rate is 3.8%. What would you expect to be the stock's price IN ONE YEAR? Round your answer to the nearest cent.

What is the present value of a security : 1. If you deposit $5,000 in a bank account that pays 8% interest annually, how much will your account balance be in 5 years? 2. What is the present value of a security that will pay $50,000 in 10 years if securities of equal risk pay 6%?

Is the same as the firm s return on equity : A firm's overall cost of capital: a. is another term for the firm s internal rate of return. b. is the required return on the total assets of a firm. c. is unaffected by changes in the tax rate. d. is the same as the firm s return on equity. e. varie..

User Account

All Pages