What minimum share price will the option buyer exercise

Assignment Help Financial Accounting

Reference no: EM133265231

Question: A Hedge Fund has a substantial position in company K shares. The share price has been volatile over the past 6 months, and a group of equity analysts working in the fund believe that the price may drop substantially over the next 3 months before recovering. Suggest two risk minimization strategies that the Hedge Fund can be adopted. In your answer, explain the derivative products that would be used, the position taken, and the cash flows at maturity.

Company H requires funding for a new factory. The company only has access to a debt facility that offers floating rate loans. However, given that the company is concerned about interest rates potentially rising in the future, it prefers a fixed rate loan. Provide advice to the company on its options.

Tony bought an options contract on BHP shares with an exercise price of $51 and an expiry date in one month. The market price for BHP shares today is $58.88. The call price is trading at $0.55.
Calculate the break-even amount for the call position.

At what minimum share price will the option buyer exercise the option on the expiration date? Provide reasoning in your answer.

Reference no: EM133265231

Questions Cloud

What sexually transmitted virus is involved : Fifteen-year-old Dolores was embarrassed to talk with her mother about the pain she felt in her "private parts," What sexually transmitted virus is involved

Develop volunteering in organization : What can we learn by volunteering in an organization that provides resources such as foods, clothes and how does it benefit the community or improve their healt

What is the economic order quantity : FINANCE FIN 772 St. Thomas University Fixed costs per order are $828 and carrying cost is $14 per unit. How many units should XYZ purchase per order?

Explain the role of cultural differences : 1. Explain the role of cultural differences in each of the following frontier conflicts of the colonial era: The Pueblo Revolt of 1680, The Pequot War, Bacon's

What minimum share price will the option buyer exercise : what minimum share price will the option buyer exercise the option on the expiration date? Provide reasoning in your answer.

Debate between essentialist and social constructionist : In the debates on women, feminism, and work, it is necessary to consider the debate between essentialist and social constructionist approaches to the difference

Discuss how early television served as a national cultural : Discuss how early television served as a national cultural reference point over the years and may have brought people together

Improve the human rights of people : The United States is often thought of as a land of opportunity, one in which there are few obstacles in the path of anyone who wants to move up. What do you thi

Why net present value investment appraisal method is prefer : Discuss the reason why the net present value investment appraisal method is preferred to other investment appraisal methods such as payback, accounting rate

User Account

All Pages