Option Trading Strategies - Two Assets $40 First Asset Profit Second Asset Profit Total Profit 1st Exercise Price - 2nd Exercise Price $20 $20 -$40 $60 Stock Price At Maturity so $20 $40 $80 Long Call $20 + Short Call $35 Long Put $40 + Long Call $40 Long Underlying S20 + Short Call $20 Long Call $40 + Short Call $50 Long Put $40 Long Put $40 + Long Call $50 Long Call $40 Long Call $25 + Short Call $35 + Short Call $35 + Long Call $45 Short Call $25 + Long Call $35 + Long Call $35 + Short Call $45 Short Call $40 + Short Put $40 Profit

Option Trading Strategies - Two Assets $40 First Asset Profit Second Asset Profit Total Profit 1st Exercise Price - 2nd Exercise Price $20 $20 -$40 $60 Stock Price At Maturity so $20 $40 $80 Long Call $20 + Short Call $35 Long Put $40 + Long Call $40 Long Underlying S20 + Short Call $20 Long Call $40 + Short Call $50 Long Put $40 Long Put $40 + Long Call $50 Long Call $40 Long Call $25 + Short Call $35 + Short Call $35 + Long Call $45 Short Call $25 + Long Call $35 + Long Call $35 + Short Call $45 Short Call $40 + Short Put $40 Profit

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Two investments have the following pattern of expected returns: Investment A Year 1 Year 2 Year 3 Year 4 Year 4 (Sale) BTCF $5,000 $10,000 $12,000 $15,000 $120,000 Investment B Year 1 Year 2 Year 3 Year 4 Year 4 (Sale) BTCF $2,000 $4,000 $1,000 $5,000 $180,000 Investment A requires an outlay of $110,000 and Investment B requires an outlay of $120,000. Required: a. What is the BTIRR on each investment? b. If the BTIRR were partitioned based on BTCFo and BTCFs' what proportions of the BTIRR would be represented by each? c. Which investment would be preferable?
Net Present Value versus Profitability Index Consider the following two mutually exclusive projects available to Global Investments, Inc.: C0 C1 C2 Profitability Index NPV A -$1,000 -$1,000 $500 1.32 $322 B -500 500 400 1.57 285 The appropriate discount rate for the projects is 10 percent. Global Investments chose to undertake Project A. At a luncheon for shareholders, the manager of a pension fund that owns a substantial amount of the firm’s stock asks you why the firm chose Project A instead of Project B when Project B has a higher profitability index. How would you, the CFO, justify your firm’s action? Are there any circumstances under which Global Investments should choose Project B?
nformation on four investment proposals is given below: Investment Proposal A B C D Investment required $ (900,000) $ (170,000) $ (90,000) $ (1,430,000) Present value of cash inflows 1,263,600 233,400 136,500 1,908,300 Net present value $ 363,600 $ 63,400 $ 46,500 $ 478,300 Life of the project 5 years 7 years 6 years 6 years Required: 1. Compute the profitability index for each investment proposal. (Round your answers to 2 decimal places.) 2. Rank the proposals in terms of preference.
Which of the two alternatives would you select under the net present value? (PV factor - 10 percent) Assume a $100,000 investment and the following cash flows for two alternatives: INVESTMENT A ($) 30,000 50,000 20,000 60,000 INVESTMENT B (S) 40,000 30,000 15,000 15,000 50,000 YEAR 1 3 4
Target EV is $200M and Reference EBITDA Adj. $11M. During the valuation call the buyer discloses $20M in quantified synergies. (a) What is the initial multiple? (b) What is the post-synergy multiple? (c) Do we accept the valuation? Plz solve all parts otherwise don't solve...
Topic: Option Pricing When computing, please do not round off. Only final answers must be rounded off to two decimal places 1. ABC Milling Corporation acquired three call options for wheat. The option has 10 tons of wheat as the underlying asset and P12,100 per ton as strike price. If on the exercise date, the market value of a ton of wheat is P12,250, what is the total value of the option contracts acquired by ABC?
NOT GRADED Excess Present Value Index and Average Rate of ReturnHighpoint Company is evaluating five different capital expenditure proposals. The company's hurdle rate for net present value analyses is 12%. A 10% salvage value is expected from each of the investments. Information on the five proposals is as follows: Proposal Required Investment PV at 12% of After-Tax Cash Flows Avg. Annual Net Income from Investment A $265,000 $305,030 $37,400 B 195,000 231,780 26,000 C 155,000 168,040 19,200 D 175,000 211,300 27,600 E 123,000 131,990 14,960 a. Compute the excess present value index for each of the five proposals.Round answers to three decimal places. Proposal Excess PV Index A Answer B Answer C Answer D Answer E Answer b. Compute the average rate of return for each of the five proposals.Round answers to one decimal place. For example, 0.4567 equals 45.7% Proposal Avg. Rate of Return A Answer B Answer C…
Lipsion Ltd company is thinking about investing in one of two potential new productsfor sale. The projections are as follows: year revenue/ product s revenue/ product v0 (150,000) outlay (150000) outlay1 14000 150002 24000 253333 44000 520004 84000 63333 Calculate the IRR for Product V only using 1% and 17% to 2 d.p.
the selling price ( 7200 )$. to unit , v. cost ( 8000 )$. to unit , the value of cont.marg.---- * ( 500 )$. ( another option ). (800)$. ( - 800 )$
Options2. Construct profit diagrams at expiration time to show what position in META puts, calls and/or underlying stock best expresses the investor’s objectives described below. META currently sells for $210 so that profit diagrams between $150 and $250 in $10 increments are appropriate. Assume that at-the-money puts and calls currently cost$30 each. The call with strike $190 costs $40 and the call with strike $230 costs $20. (a) An investor wants to benefit from META price drops but does not want to lose more than $30 on the investment. (b) An investor wants to have a positive payoff if the upcoming META earnings announcement is close to market expectations—meaning that the price will not move by more than $20 dollars.
Topic: Option Pricing When computing, please do not round off. Only final answers must be rounded off to two decimal places. 1. ABC Mining Inc. bought a option for P1,225. The option allows ABC to sell 10 tons of copper at a price of P30,200 per ton one month from now. If on the exercise date, a ton of copper sells for P29,600, how much is the net benefit obtained by ABC from the contract>
An investor has $10,000 invested in asset (X). His advisor recommend a new asset ( Y) for investment with following rate of returns and probabilities: X -10 5 15 Total -5 0.04 0.05 0.01 0.1 -10 0.05 0.05 0.05 0.15 Y 0 0.02 0.1 0.08 0.2 15 0.04 0.2 0.06 0.3 25 0.05 0.1 0.1 0.25 Total 0.2 0.5 0.3 1 a.) Do you agree with the advisor recommendation to invest in asset Y? Explain. b.) If the investor able to divide his money and put it in a new portfolio: $5,000 (50%) in asset (X) and $5,000 (50%) in asset (Y). Would you recommend the new portfolio? Explain.

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