BCD Company offer its investors option contracts to buy their shares at a price of P50. Currently, the value of their stocks in the market stands at P60. The 52-week high of the share price is P83 and its 52-week low is P47. The treasury bill issued by the government yields 8.25% currently.
Q: Investor considers entering a 1Y forward contract for a delivery of 5 shares of company ABC which he…
A:
Q: Bertrand issued $10 million convertible loan notes on 1 October 20X0 that carry a nominal interest…
A: Coupon = $ 10,000,000 x 5% = $ 500,000 Market rate of Interest of Similar Bonds = 8% Discount Factor…
Q: The company offered its investors option contracts to buy their shares at P72 with the current price…
A: Put option: It is the right given to the owner to sell the share at a specific price and date. When…
Q: Collins Corporation is planning to sell a new $1,000 face value, 9% coupon, 15-year bond issue to…
A: A bond is a financial security that helps to raise debt funds for government bodies and large…
Q: Suppose you decided to enter into a futures contract involving a stock that sells for Php888.75 per…
A: Here, Stock Price per share is Php 888.75 Total no. of Shares is 1000 shares Initial Margin…
Q: Currently (on June 23) the value of August BIST 30 index futures is 1560 while the spot BIST 30…
A: The value of a futures contract can be determined by the use of the cost and carry model. The model…
Q: ABC Corp, is thinking about recalling P30 million of 15 year, P1,000 par value bonds, that were…
A: Bond retirement and reissue: A company may recall a bond if the bond has such a provision at the…
Q: An investor pays $30,000 for a convertible bond (one that can be converted into shares of corporate…
A: The convert price is the price per share at which a convertible security may be exchanged into…
Q: The company offered its investors option contracts to buy their shares at P72 with the current price…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: Nanno Company offers its investors option contracts to buy their shares at a price of P50.…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: On March 2021, a 6-month long forward contract on a dividend-paying stock is agreed between two…
A: The question is to find the forward price of a stock with help of the cost and carry model. The…
Q: OneChicago has just introduced a single-stock futures contract on Brandex stock, a company that…
A: a. The calculation of the futures price is as follows: Hence, the futures price is $127.20.
Q: BDJ Co. wants to issue new 21-year bonds for some much-needed expansion projects. The company…
A: Bonds are fixed-income assets that serve as a representation of investor loans to borrowers…
Q: BCD Company offer its investors option contracts to buy their shares at a price of P50. Currently,…
A: The binomial model for option pricing is an important model that determines the option price. It…
Q: BDJ Co. wants to issue new 22-year bonds for some much-needed expansion projects. The company…
A: Solution:- We know, when a bond trades at par, coupon rate of bond = Yield to maturity of bond…
Q: On 01st Jan 2017, ABC Company issued A 5-year bond with a principal of $100 000, annual coupons of…
A: The price of the bond computation is stated as below:- Bond Price=C×1-(1+r)-nr+F(1+r)nwhere,…
Q: ation bought a put option on XYZ Corp. P5,000,000-face value bonds for a premium of P25,000. The…
A: A put option is an instrument which provides its holder an option to sell an underlying asset on a…
Q: ABC Corporation plans to purchase a call option for 1,000 Red Corp. ordinary shares at a strike…
A: Black Scholes Model is used to calculate the value of a call option and requires 5 variables to…
Q: ors of XUP Ltd has decided to grant at-the-money European call options on the company’s stock to its…
A: The given problem relates to black scholes model.
Q: The common stock of Company XLT and its derivative securities currently trade in the market at the…
A: Part (a)Let's denote current stock price as S0, call premium as C, put premium as P, strike price as…
Q: 6. Today is March 31, and corporation RPK plans to issue $450 million in 30-year bonds on May 15th.…
A: Future contract hedging is the strategy followed to avoid interest rate risk or price movement risk.…
Q: 1. In June 2021, DMRR Bahrain, a car watch manufacturer issued $1.2 billion in convertible bonds.…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: The company wants to sell a Php 69,000,000 worth of bonds with a maturity of 25 years. The coupon…
A: Bonds: Bonds are the liabilities for the company that is issued to generate the funds required for…
Q: Stock of HLL is currently trading in the market at Rs.220. The price of the stock is expected to go…
A:
Q: ABC Corporation has decided to sell ₱1000 bonds which will pay semiannual dividends of ₱20 (2% per…
A:
Q: Basic Industries (BBI) issued $1,000 face-value convertible bonds three years ago and BBI stock…
A: Price of bond is present value of coupon payment and present value of par value.
Q: n March 2022, ABC Co. is considering the issuance of $100 million 10-year bonds rated AAA. The issue…
A: Rates of AAA bonds are related directly to the treasury bond future contracts so can use for hedging…
Q: Standard Olive Company of California has a $1,000 par value convertible bond outstanding with a…
A: Conversion price Bond par value / Conversion ratio Conversion value Conversion ratio *…
Q: Goldman Sachs issues $10 million in three-year convertible bonds with a 8% yield to maturity and a…
A: A convertible bond is a fixed-income corporate financial asset that pays interest but may be…
Q: Chamberlain Co. wants to issue new 15-year bonds for some much-needed expansion projects. The…
A: The coupon bonds generally trade at par when a coupon rate is equal to market yield. So, new bonds…
Q: Kris Corporation has the option to sell its investment in Joshua bonds at P4,500,000. It can…
A: Options are derivative financial instruments dependent on the value of underlying securities like…
Q: ABC Corporation plans to purchase a call option for 1,000 Red Corp. ordinary shares at a strike…
A: Stock Price P…
Q: ight months ago, the Zeus Fund entered into a short position in a one-year forward contract on 1,250…
A: In forward market there is direct contract between two parties for future deliveries.
Q: BCD Company offer its investors option contracts to buy their shares at a price of P50. Currently,…
A: Given, The spot price is P60 Risk free rate is 8.25%
Q: The buying and selling commission schedule shown in the table is from an online discount brokerage…
A: Cost of buying the shares (P) = Cost of purchase + Commission Cost of purchase = 105*$60 = $6300…
Q: Chamberlain Co. wants to issue new 14-year bonds for some much-needed expansion projects. The…
A: New coupon rate should be equal to current YTM's: =RATE(14*2,8.6%/2*1000,-1,032.95,1000)*2 = 8%
Q: n, 20-year Government of Canada bond was issued on Jun 15, 2016. At what price did it trade on…
A:
Q: Mariano Manufacturing can issue a 25-year, 8.1% annual payment bond at par. Its investment bankers…
A: After-Tax Return on Bonds = Pretax Return * (1-Tax Rate) After-Tax Return on Bonds = 8.1% * (1-40%)…
Q: SBI share is Rs. 200 per share Future lot size is 3000 Margin requirement is 15% Future expiry is…
A: Call options is a type of option derivatives that gives right not obligation to the buyer to buy or…
Q: On January 1, 2020, ABC Corporation invested in P2,000,000 bonds of DEF Company that will mature on…
A: We have invested today 2000000 on which we have received interest at 10% for the next three years.…
Q: Mariano Manufacturing can issue a 25-year, 8.1% annual payment bond at par. Its investment bankers…
A: Concept used : Dividend received deduction is used in US which says, only 30% dividend is taxable…
Q: current position of
A: A call option is a financial contract that provides the buyer to buy the right but does not provide…
What should be the reasonable price of the options contracts of the company?
Step by step
Solved in 2 steps with 1 images
- BCD Company offer its investors option contracts to buy their shares at a price of P50. Currently, the value of their stocks in the market stands at P60. The 52-week high of the share price is P83 and its 52-week low is P47. The treasury bill issued by the government yields 8.25% currently. What’s the probability for the up move?Nanno Company offers its investors option contracts to buy their shares at a price of P50. Currently, the value of their stocks in the market stands at P60. The 52-week high of the share price is P83 and its 52-week low is P47. The treasury bill issued by the government yields 8.25% currently. REQUIRED: What’s the probability for the up move? What’s the probability for the down move? How much is the total option pay off for the stock? What should be the reasonable price of the option contracts of the company?The company offered its investors option contracts to buy their shares at P72 with the current price of P90. They were only given 90 days to exercise their rights. 52 week-high for the stock is P95 while the 52-week low is P70. The T-bill rate is 7.32%. 1. What is the value of Nd1 and Nd2? (Use 4 decimal places) 2. What is the volatility rate? (Use percentage and at least, two decimal places) 3. What is the value of the call option and put options? (Use two decimal places)
- Mazzi Corp. shares are currently trading at RM14.00 each. A three-month put option on this share is priced RM0.50 at a strike price of RM15.00. The risk free interest is 10% per annum for all maturities. Observing this data, identify and calculate what are the arbitrage opportunities available. J-Rata Corp can supply 50,000 metric tons (MT) of crude palm oil (CPO) to L-Brothers on 15th March 2021. The current CPO price is RM3400 per MT. It is expected that the CPO could be trading at RM2700 per MT on 15th March 2021. The FCPO (CPO Futures) is currently trading at RM3450 per MT. Each FCPO contract is 25 MTs. If the FCPO is trading at RM2100 per MT on 15th March 2021, calculate the net sales revenue of J-Rata Corp in this supply transaction if it decides to hedge by using FCPO contracts. J-Rata Corp shares are currently trading at $30 each. It is expected to increase by 10% or decrease by 6% during the next two-three months. If its strike price at maturity in six months is set as $32 and…The company offered its investors option contracts to buy their shares at P72 with the current price of P90. They were only given 90 days to exercise their rights. 52 week-high for the stock is P95 while the 52-week low is P70. The T-bill rate is 7.32%. REQUIRED: Value of Nd1. (Use 4 decimal places) ANS: 0.9991 Value of Nd2. (Use 4 decimal places) ANS: 0.9990 Volatility rate. (Use percentage and at least, two decimal places) ANS: 15.78% Value of the call option. (Use two decimal places) Value of the put options. (Use two decimal places)The company offered its investors option contracts to buy their shares at P72 with the current price of P90. They were only given 90 days to exercise their rights. 52 week-high for the stock is P95 while the 52-week low is P70. The T-bill rate is 7.32%. REQUIRED: Value of Nd1. (Use 4 decimal places) Value of Nd2. (Use 4 decimal places) Volatility rate. (Use percentage and at least, two decimal places) Value of the call option. (Use two decimal places) Value of the put options. (Use two decimal places)
- EDC will be issuing preference shares with a total face value of P120,000,000 for a net proceed of P122,000,000. It will be irredeemable and will pay 8% annually. If the tax rate is 25%, what is the effective cost of the preference shares?ABC Corporation plans to purchase a call option for 1,000 Red Corp. ordinary shares at a strike price of P489 per share. The contract will be exercisable four months from purchase. The details about the underlying asset are as follows: Market value per share 534.00 Volatility 10% Risk-free rate 3% If the call option is currently selling at P40,000, it is currently over or (under) valued by how much? Use 360 days in a year.OneChicago has just introduced a new single stock futures contract on the stock of Brandex, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in one year. The T-bill rate is 3% per year. Required: a. If Brandex stock now sells at $150 per share, what should the futures price be? (Round your answer to 2 decimal places.) b. Brandex stock now sells at $150 per share. If the Brandex stock price drops by 2.0%, what will be the new futures price and the change in the investor's margin account? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.) c. Brandex stock now sells at $150 per share. If the margin on the contract is $20,000, what is the percentage return on the investor's position, if the Brandex stock price drops by 2.0%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
- The Bulldogs Inc.’s stock price is believe to decline from its current level of P125 anytime during the next 9 months. A 9-month put option for P975 is available to be purchased and it gives the buyer the right to sell 100 shares at a price of P130 per share. What would be the net profit if a 100-share contract is bought for P975 and Bulldogs Inc.’s stock price actually dropped to P90?Eight months ago, the Zeus Fund entered into a short position in a one-year forward contract on 1,250 shares of Cerner Corporation stock at a forward contract price of $94 per share. Today, the price of Cerner stock is $92.50 per share and the interest rate for continuous compounding is 1%. Cerner stock does not pay dividends. What is today’s market value of the forward contract? If the Zeus Fund wanted to exit the contract today, how much should it be willing to pay, or how much should it expect to receive, from its counterparty?Perpetual preferred stock from Franklin Inc. sells for $97.50 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC? a. 9.44% b. 9.08% c. 9.82% d. 8.72% e. 10.22%