What was the total cost of the options at purchase in june

Assignment Help Accounting Basics
Reference no: EM133090549

Question - In June, an investor purchased 10 XYZ September 50 Calls when XYZ was trading for $45, paying a premium of $2.  In August, XYZ rises in value to $55 and the call options trade for $6.

Required -

A. What was the total cost of the options at purchase in June?

B. What is the intrinsic and time value of the options in August?

C. If the investor were to sell the options in August, what is her net gain or loss?

D. Explain a key benefit of the call option in contrast to purchasing the shares using the above transaction as an example. Include calculations to support your answer.

Reference no: EM133090549

Questions Cloud

Performance reviews : Performance reviews (appraisals) can be limited to feedback from a supervisor to an employee, or involve multiple sources of ratings, including customers,
What is the budgeted production for the year : The estimated January 1 inventory is 3,529 units, and the desired December 31 inventory is 6,755 units. What is the budgeted production (in units) for the year
Nonacademic business literature of business research project : Find an example in the nonacademic business literature of a business research project that has damaged the reputation or returns of the business
Improve the sustainability performance : Suggest the business case for three initiatives that the company could implement to improve the sustainability performance.
What was the total cost of the options at purchase in june : An investor purchased 10 XYZ September 50 Calls when XYZ was trading for $45, paying a premium of $2. What was the total cost of the options at purchase in June
What is a private enterprise system : What is a private enterprise system? Name and describe the four factors of production? Which one do you think is the most important? Why?
Prepare the journal entries for p and s : Prepare the journal entries for P and S. In addition, the workpaper entries necessary to eliminate the effects of the intercompany sales for 2020
Standard quantity allowed for the output : Sheridan Company has a materials price standard of $2.00 per pound. 5700 pounds of materials were purchased at $2.20 a pound.
Explain the extent of involvement in international trade : Explain the extent of involvement in international trade. What are major challenges facing the global management worker?

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much was deposited in an account on July

How much was deposited in an account on July 7, 2014 in order to have a balance of $4,000 on January 18, 2016? The account earns 2.65%

  What is the single audit act

What is the Single Audit Act? How has this act influenced auditing of governmental agencies? What types of reports and opinions do the auditors provide

  What the expected price of stock five years from today is

The dividend is expected to grow at a constant rate of 5%. The stock has a required rate of return at 9%. The expected price of the stock five years from today

  Provide an investor or creditor with the information needed

Then, imagine you are an investor or creditor; suggest the ratios that you believe would provide an investor or creditor with the most important information needed to make accurate predictions about the company's financial condition.

  Prepare the journal entries to record the benefits

Prepare the journal entries to record the benefits of the loss carryback and the loss carryforward. Cheyenne expects to return to profitability in 2018

  What is the performance obligation

Comfort King Ltd. sells central air units to residents as well as ongoing maintenance plans. What is the performance obligation

  What is the accounts receivable balance at December

Sales during the year 60% on account, terms: 10/10, 5/15, n/30 and 40% cash sales 4,000,000. What is the accounts receivable balance at December

  Prepare the entry to record the departure of manning

Manning decides to leave the partnership. McNabb agrees to pay Manning $73 000 in a private transaction for his entire share in the business.

  Toyota motor corporation uses target costing assume that

toyota motor corporation uses target costing. assume that toyota marketing personnel estimate that the competitive

  What is meant by risk assessment process

What is the control environment? What are the elements that comprise the control environment? What is meant by risk assessment process?

  Calculate the depreciation expense for each year

An asset is purchased on January 1 at a cost of $25,000. Calculate the depreciation expense for each year of the asset's useful life

  How much cash interest will advance receive each year

The FermaCo bonds pay interest at the annual rate of 3% on June 30 and December 31 - How much cash interest will Advance receive each year

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