A trader took a short position on 122 European call options (lot size: 100 securities in one option contract) with a strike price of $ 67.89 (per security), a premium of $3.21 (per security), and a time to maturity of four months. The price of the underlying asset on the spot market proves to be $70.74 (per security) in four months. What is the trader’s total gain or loss?
Q: Which of the following is an essential step in the case of cost/income equivalents for comparing…
A: In financial analysis there is need of comparisons between machines to select most economically…
Q: An analyst creates a probabilistic scenario analysis for projecting stock market returns. The…
A: Given, The returns and probabilities of a stock
Q: Which of the following is true? A.Forward contract buyers and sellers do not know who the…
A: Forward and futures contracts are derivatives agreements in which two parties associate to acquire…
Q: Which form of receivables financing is least complex?
A: factoring is a form of receivables and debtor finance
Q: Mr Price, has no debt outstanding and a total market value of R150,000. Earnings before interest and…
A: Earnings per share(EPS) refers to an indicator or a financial ratio that shows how much a company is…
Q: 1. An asset that is purchased with the expectation that it will produce income or appreciate at some…
A: Hi, since you have posted multiple question, I am answering the first three. Please repost the…
Q: Schnussenberg Corporation's stock just paid a dividend of $1.60 a share (i.e., D0 = $1.60). The…
A: Current price of stock may be calculated using dividend discount method using following formula…
Q: Using the corporate valuation model approach, what should be the company's stock price today?
A: Free cash flow = (EBIT*(1-T)) + Depreciation exp. - Capital expenditure - Changes in working capital…
Q: Suppose that consumers have utility function U(C) = log(C) where C is the consumption level and log…
A: The utility of an organization or the aggregate economy over a future period of time, under unknown…
Q: what is the present worth (PW) for the following cash flow?. Use (i=6%) Annual payment= $100 per…
A: Present worth of a future amount can be calculated as: = Future amount * Present Value Factor (i%, n…
Q: The current exchange rate between the Japanese yen and the U.S. dollar is ¥90 per dollar. If the…
A: The exchange rate is the rate at which one currency can be bought for another. Depreciation of a…
Q: ich of the following gross valuation methods on a building would most likely be used by a…
A: There are many methods of doing valuation of the building but some are not used much but some are…
Q: critically discuss the advantages and disadvantages of rights issue.
A: Right issues is raising money from existing shareholders by providing more equity to existing…
Q: Silo Mills is an all-equity financed firm that has a beta of 1.18 and a cost of equity of 12.2…
A: Cost of equity refers to the cost incurred by the company for issuing new equity. When a company use…
Q: A trader writes 564 January put options on common shares of Carnival Corporation & plc. Lot size:…
A: Strike price = $14.7 Option premium = $3.5 Underlying share price = $12.1 Number of options = 564…
Q: 1 A 0 $1,000 $800 YR NPWB 0 A=$1,200 1 2 3 YF
A: Net present value is difference between the present value of cash flow to the initial investment of…
Q: Shawn is buying a new Jet Ski for $12,500. He is considering two credit options. Option A offers a 6…
A: There are various alternatives to financing. Taking a loan from a third party is an easily…
Q: Various types of budgets facilitate understanding about the big picture of a business. There are…
A: Budget A budget is the estimate of incomes and expenses over a specified period. A budget helps in…
Q: If the Canadian dollar to U.S. dollar exchange rate is 1.30 and the British pound to U.S. dollar…
A: 1 US dollar = 1.30 Canadian dollar 1 US dollar = 0.77 British pound We need to find Canadian dollar…
Q: 3. Maricel borrows P 10 000 with interest at 15% compounded monthly. How much should she pay at the…
A: Future Value = Present Value*(1+Interest rate)n Where n = Time period
Q: 17) What is the total risk (measured by standard deviation) of a two-asset portfolio made up of:…
A: Solution:- Total risk is measured by standard deviation of a portfolio. It means that how much will…
Q: Ellen is shopping for a truck and has up to $325 to spend biweekly at a dealership in Selkirk, MB…
A: Maximum bi-weekly payment "PMT" = $325 Number of years = 25 Number of periods "NPER"= 5*52/2 = 130…
Q: company's discount rate is 12%, then the net present value for this investment is closest to:…
A: NPV= Present value of cashinflows - Present value of cashoutflows.
Q: A Php 100,000,10% bond pays dividend every quarter for 8 years. The bond price at par and is…
A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…
Q: 6. Construct an amortization schedule for a loan of RM5,000 to be amortized annually for 4 years at…
A: Loan (mortgage) amortization schedule refers to a schedule which is prepared to shows the periodic…
Q: Determine the rate of return on the total investment and the payout period if the annual profit is…
A: Payback (payout) period refers to the period within which the sum invested by the company in a…
Q: An equipment cost P67,000 and has a life of 10 years and salvage value of P53,500. Determine its…
A: Cost = P67,000 Life = 10 years Salvage Value = P53,500 (after 10 years) Depreciation for 10 years =…
Q: Differentiate between Closed-End and Open-End funds.
A: Various options are available for investment through different channels. On the basis of different…
Q: For an 11-year, $1,000 par value, 5.08% semiannual-pay bond currently trading at $921.41, calculate…
A: Modified duration helps in determining the price change in the bond for 1% change in interest rate.…
Q: Bruno Inc.'s Financial Statement for years 2014-2015. Compute for the Bruno Inc. Year 2015 Debt to…
A: The debt-to-equity ratio is used to measure how much leverage a company has. It is a measure of the…
Q: The returns on AA Berhad and BB Berhad are given below, State of Economy Probability of Return (%)…
A: Data given: State of Economy Probability of occurring Return(%) of AA Berhad Return(%) BB Berhad…
Q: Bradford inc. has a coupon bond that has a 10% coupon rate. The bond has a par value of $1000 and is…
A: A bond is a debt instrument used to raise capital by a company or the government. It can be traded…
Q: Suppose that the CAPM holds and that BP’s stock has a beta of 2. If the expected market return is…
A: Required rate of return on stock may ne calculated using CAPM formula as given below Required rate…
Q: Debt payments of $1,650 and $2,400 are due in five months and nine months, respectively. What single…
A: Time value of money (TVM) refers to the method used to measure the amount of money at different…
Q: Assume the market rate of return is 10.1 percent and the risk-free rate of return is 3.2 percent.…
A: The systematic risk of the market (beta) is 1. Therefore the beta of Lexant = 1 - 2%, which is 0.95…
Q: Mr Price, has no debt outstanding and a total market value of R150,000. Earnings before interest and…
A: Here, To Find: % Change in EPS when the economy expands =?
Q: rate" is characterized by being The "discount administered by the Federal Reserve System and not…
A: The discount rate is the rate that the Fed charges to commercial banks and other financial…
Q: If interest is compounded at 20% per year, how long will it take for P50,000 to accumulate to…
A: Interest rate = 0.20 Initial investment = P50,000 Accumulated value = P86,400 Period = ?…
Q: If the manager of a gold mine wants to protect its operations against a market price decline, while…
A: It is a financial instrument whose value/price is determined by the given assets. Options, forwards,…
Q: Imagine that you have worked every summer for the last four years in order to save money to buy a…
A: When Stock markets are crashing, people tens to withdraw money from stocks and invest in other safer…
Q: GSM Inc. STOCK RETURN YEAR PRICE Jan-2021 P57.70 Feb-2021 P52.90 Mar-2021 P50.95 Apr-2021 P58.25…
A: Here, Total Return =? Average Return =? Standard Deviation =?
Q: i) Estimate Mencias Corp. total financing requirements (total assets). ii) What is Mencias Corp. net…
A:
Q: What is idiosyncratic risk? How does it differ from market risk?
A: Idiosyncratic risk or unsystematic risk or specific risk is that risk which belongs to specific…
Q: Data from The Economist BigMac index from January 2022 shows that the local price of a Big Mac in…
A: Purchasing power parity says that purchase power of both countries must be equal and exchange rate…
Q: What is the total return of an equal-weighted index over the holding period given the following data…
A: Return refers to the additional earnings over the invested amount. Basically, it is a profit which…
Q: 6. Find the amount at the end of 15 years if P 55 000 is invested at an interest rate of 5%…
A: Future value can be calculated as: = Present value * (1 + rate)^periods
Q: The 2020 balance sheet of Osaka’s Tennis Shop, Incorporated, showed long-term debt of $2.25 million,…
A: Cashflow means movement of cash in the firm. It can be positive or negative. Positive movement means…
Q: Mr. Cruz borrowed P100,000 from BPI at a stated rate of 6% payable over a period of one-year. What…
A: Loan amount = P100,000 Interest rate = 0.06 Interest amount = P6,000 (i.e. P100,000 * 0.06)…
Q: If you can earn 13% percent on similar-risk investments, what is the most you would be willing to…
A: We will use the dividend discount model here. As per the dividend discount model the intrinsic value…
Q: A proposed acquisition may create synergy by: I. increasing the market power of the…
A: Synergy is an important aspect of mergers and acquisitions. Synergy refers to all forms of benefits…
A trader took a short position on 122 European call options (lot size: 100 securities in one option contract) with a strike price of $ 67.89 (per security), a premium of $3.21 (per security), and a time to maturity of four months. The price of the underlying asset on the spot market proves to be $70.74 (per security) in four months. What is the trader’s total gain or loss?
Step by step
Solved in 2 steps
- A trader owns 55,000 units of a particular asset and decides to hedge the value of her position with futures contract on another related asset. Each futures contract is on 5,000 units. The spot price of the asset that is owned is $28 and the standard deviation of the percentage one-day change in the price over the life of the hedge is estimated to be $0.43. The futures price of the related asset is $27 and the standard deviation of the percentage one- day change in this over the life of the hedge is $0.40. The coefficient of correlation between the spot price percentage one-day change and futures price percentage one-day change is 0.95. (1) What is the minimum variance hedge ratio? (2) Should the hedge take a long or short futures position?(3) What is the optimal number of futures contracts?An Indian company has a receivable of USD 100,000 to be collected in one month (June). The manager of the Indian Company decided to hedge its risk through market derivatives. He contacted a Forex trader to check the available alternatives. He was provided the following information: Hedging with a forward contract One-month forward rate: INR/USD= 0.0055 Hedging with a call-option contract Exercise Price: INR/USD= 0,0050 Premium: 5% of the value of the option Contract Size: USD 50,000 Maturity: June Hedging with a put-option contract Exercise Price: INR/USD= 0,060 Premium: 2% of the value of the option Contract Size: USD 100,000 Maturity: June Which derivative is the best for this Indian company if on June the exchange rate is INR/USD= 0.062?A collar is established by buying a share of stock for $54, buying a 6-month put option with exercise price $47, and writing a 6-month call option with exercise price $61. On the basis of the volatility of the stock, you calculate that for a strike price of $47 and expiration of 6 months, N(d1) = 0.7298, whereas for the exercise price of $61, N(d1) = 0.6374. Required: What will be the gain or loss on the collar if the stock price increases by $1? What happens to the delta of the portfolio if the stock price becomes very large? What happens to the delta of the portfolio if the stock price becomes very small?
- The one-year futures price on a particular stock - index portfolio is 1,124.91, the stock index currently is 1, 116, the one-year risk-free interest rate is 2.61%, and the year-end dividend that will be paid on a $1,116 investment in the index portfolio is $13.73. By how much is the contract mispriced? future price - parity priceSuppose you decided to enter into a futures contract involving a stock that sells for Php888.75 per share and you purchased 1,000 shares of this stock. The initial margin requirement is 25% of the price and the maintenance margin requirement per contract is 20% of the stock price. Assume that you went 5 long contracts. (Show complete solution for each item.) A. How much would you have to pay in initial margin? B. How much is the maintenance margin requirement value? C. What is the price of the stock when maintenance margin will be hit? Interpret the result.A stock is expected to pay a dividend of $1 per share in 2 months. An investor purchased a forward contract on the stock at a forward price of $50 some time ago. The contract now has 3 months to its delivery date. The stock is currently trading at $55 and the risk free rate is 4% on a continuously compounded basis. Consider the following statements. I. The price of a forward contract on the stock with 3 months to the delivery date is $54.55 II. The value of the investor’s forward position is $5.50 Which of the following is correct? (No excel pls) a. Statement I is incorrect, Statement II is correct. b. Both statements are correct. c. Both statements are incorrect. d. Statement I is correct, Statement II is incorrect.
- Suppose an investor sells 100 stocks by short selling for 6 months, the stock price is 30 yuan, and the annual interest rate of 6 months is fixed at 3%. How can I use forward contracts to avoid risks? What is the execution price? Please analyze if the stock price rises to 35 yuan or falls to 25 yuan after 6 months of hedging, what are the losses of this investor?A copper futures contract requires the long trader to buy £ 25,000 of copper. The trader buys one November copper futures contract at $ 0.75 per pound. According to historical data, copper prices moved in the range of $ 0.53-0.87 per pound. The market is confident that this trend will continue in the future. What is the maximum loss this trader can have? Another trader sells one November copper futures contract. What is the maximum loss this short trader can have?A trader sells (or "writes", or "shorts") 100 European call options on a stock with a strike price of $23 and a time to maturity of one year. Each option is on one share of the stock. The price of each option is $4. One year later, the price of the underlying asset proves to be $28. What is the trader’s profit?\\n\\nNote: A gain is represented by a positive number, a loss is represented by a negative number. Please do not include any symbols other than the decimal point, such as the $ or % sign, or any text in your answer
- The price of Stock Y, which is currently $80, can go to $120, $90, or $60 in 6 months’ time. Security A pays $1 if the price of Stock Y in 6 months is $120, and zero otherwise. Security B pays $1 if the price of Stock Y in 6 months is $90, and zero otherwise. Security C pays $1 if the price of Stock Y in 6 months is $60, and zero otherwise. The prices of these securities are ??, ??, and ??, respectively. The discretely compounded risk-free interest rate is 5% per half-year (not annualized). When answering the questions below, explain your calculations. i. In the absence of arbitrage, what is the total cost of purchasing one unit each of securities A, B, and C? ii. If ?? = 0.2/1.05 ≈ 0.190476, what is the value of a 6-month European call on Stock Y with an exercise price of $75the multiplier of a futures contract on the stock market index is $250. The maturity of the contract is one year. The current level of the index is 2550 , and the risk free interest rate is .0% per month. The dividend yield on the index is .2% per month. Suppose that after five months, the stock index is at $2495. Assume that the party condition always hold exactly. Find the holding period return for the short position if the initial margin of the contract is 10% of the original contract value.Mr. Saso holds a short position in euros through five March futures contracts, with each contract size equaling €125,000. The settlement price is $1.18/€. If the spot exchange rate, at maturity, is $1.12/€, what is the total value of Mr. Saso’s position at maturity? Question 6 options: Loss of $7,500 Profit of $7,500 Loss of $37,500 Profit of $37,500