User Account

All Pages

What will nico profit be on the stock transaction

Assignment Help Financial Accounting
Reference no: EM132956916

Nico Yong is considering the purchase of 100 shares of Cisco Systems stock at $22 per share. Because the economy is picking up, Nico believes the demand for Oracle's router systems will increase substantially causing the price of Cisco's shares to increase to $30 per share. As an alternative, Nico is considering the purchase of a call option for 100 shares of Cisco at with an exercise price of $25. This 180 day option will cost Nico $200. Assume no brokerage costs or dividends.

Problem (a) What will Nico's profit be on the stock transaction if he decides to buy the stock and its price does increase to $30 per share and he sells?

Problem (b) How much will Nico earn on the option transaction if he purchases the option and the underlying stock price rises to $30?

Problem (c) How much must the stock price rise for Nico to break even on the option transaction?

Problem (d) Based on parts (a) and (b) above, what should Nico do? Explain.

Reference no: EM132956916

Questions Cloud

Trends in labor and employment environment : Below are some predicted trends in labor and employment environment.
How a change in the fair value of a firm : Question - How a change in the fair value of a firm's trading securities affect its cash flow from investing activities
What are the primary benefits of a diverse organization : Diversity presents both challenges and opportunities for any organization? Explain briefly
What amount should be reported as sales for the current year : ABC Company reported sales revenue of P4,600,000 in the income statement for the year ended December. What amount should be reported as sales
What will nico profit be on the stock transaction : What will Nico's profit be on the stock transaction if he decides to buy the stock and its price does increase to $30 per share and he sells?
Determine the carrying amount of the bonds as of january : As of December 31 of the same year, the bonds were found to have a fair value of 10,500,000. Determine the Carrying amount of the bonds as of January
What is the rate earned on stockholders equity for year : Question - If net income is $150,000 and interest expense is $20,000 for Year 2, what is the rate earned on stockholders' equity for Year 2
Calculate the net present value of the dock : The company anticipates annual cash flows of $140,000 resulting from the new clock. Calculate the net present value of the dock
What is the gross investment in the lease : The entity expects a 12% return. At the end of the lease term, the equipment will revert to the lessor. What is the gross investment in the lease

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is meant by the true and fair view

Analyse the impact of the European Community / Union on the UK financial reporting environment. Include examples in your answer.

  Find what is the annual carrying costs of cheese inventory

The company is using Economic Order Quantity model in placing the orders. What is the annual carrying costs of cheese inventory.

  Calculate the pension expense

Calculate the pension expense, defined pension obligation, plan assets, and pension liability accounts at December 31, 2021, using a pension worksheet

  Prepare an appropriation statement for the partnership

Prepare an appropriation statement for the partnership. Mary and Johns run a business together and are organized as a partnership to which each has contributed

  Estimate Expo cost of equity using the CAPM

Expo has a beta of 1.8. The Treasury bond yield is 3% and the return on the S&P 500 is 10%. Estimate Expo's cost of equity using the CAPM

  Which accounts normally reflect credit balances

Which accounts normally reflect credit balances in an unadjusted trial balance? Liabilities, capital, withdrawals, and expenses. / Liabilities, capital, revenue

  Questions on techniques of project evaluation

Multiple choice questions on techniques of project evaluation -  Which of the following techniques may not consider ALL cash flows of a project?

  What are the datastores in the nice lawn sales narrative

Nice Lawn sells lawn ornaments online to other businesses. Nice Lawn customers place an online order. Nice Lawn processes the customer order by verifying with the accounting department that the customer's credit is in good standing with the company (..

  Calculate the cumulative average abnormal return

The return on ABC Ltd.'s shares on a day was 0.7 per cent. Calculate the cumulative average abnormal return for these three companies over these two days

  Which a firm musthave an investment-grade rating

To be eligible to use Rule 415, a firm musthave an investment-grade rating. never have violated any of the provisions of the Securities Act of 1934.

  Compute the cash flows from operating activities

Assuming there were no other cash flows from operations, using the direct method of computing cash flows from operating activities

  Cost-volume-profit analysis

Cost-volume-profit analysis cannot be used if which of the following occurs?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd