ou believe that oll prices will be rising more than expected, and that rising prices will result in lower earnings for industrial companies that use a lot petroleum-related products in their operations. You also believe that the effects on this sector will be magnified because consumer demand will fall ou locate an exchange traded fund, QLT, that represents a basket of industrial companies. You don't want to short the ETF because you don't have our account. QLT is currently trading at $32.49. You decide to buy a put option (for 100 shares) with a strike price of $34.05, priced at $2.22. It turni correct. At expiration, QLT is trading at $30.20. Calculate your profit. (Click on the icon here in order to copy the contents of the data table below spreadsheet) QLT: Materials-532.49 Calls Strike Expiration $30.20 November $34.05 November $1.22 Price $1.22 he profit of the trade before trading costs is $ (Round to the nearest cent.) Strike $30.20 $34.05 Puts Expiration Price November $2.63 November $2.22
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- You believe that oil prices will be rising more than expected, and that nsing prices will result in lower earnings for industrial companies that use a lot of petroleum-related products in their operations. You also believe that the effects on this sector will be magnified because consumer demand will fall as oil prices rise. You locate an exchange traded fund, QLT, that represents a basket of industrial companies. You don't want to short the ETF because you don't have enough margin in your account. QLT is currently trading at $32.19. You decide to buy a put option (for 100 shares) with a strike price of $33.50, priced at $2.29. What is your profit if you are wrong and the price of XLB increases to $35.50 on the expiration date? (Click on the icon here in order to copy the contents of the data table below into a spreadsheet) QLT: Materials-$32.19 Strike $31.00 $33.50 Calls Expiration Price $1.26 November November $1.26 Puts Expiration Price November $2.58 $2,29 Strike $31.00 $33.50…You believe that oil prices will be rising more than expected, and that rising prices will result in lower earnings for industrial companies that use a lot of petroleum-related products in their operations. You also believe that the effects on this sector will be magnified because consumer demand will fall as oil prices rise. You locate an exchange traded fund, QLT, that represents a basket of industrial companies. You don't want to short the ETF because you don't have enough margin in your account. QLT is currently trading at $32.68. You decide to buy a put option (for 100 shares) with a strike price of $33.90, priced at $2.26. It turns out that you are correct. At expiration, QLT is trading at $30.05. Calculate your profit. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) QLT: Materials-$32.68 Calls Price Strike Expiration $30.05 November $1.26 $33.90 November $1.26 The profit of the trade before trading costs is $ Puts Expiration…The market for capital Firms require capital to invest in productive opportunities. The best firms with the most profitable opportunities can attract capital away from inefficient firms with less profitable opportunities. Investors supply firms with capital at a cost called the interest rate. The interest rate that investors require is determined by several factors, including the availability of production opportunities, the time preference for current consumption, risk, and inflation. Suppose the Federal Reserve (the Fed) decides to tighten credit by contracting the money supply. Use the following graph by moving the black X to show what happens to the equilibrium level of borrowing and the new equilibrium interest rate. Q1. Which tend to be more volatile, short- or long-term interest rates? Long-term interest rates 2. Short-term interest rates Q2. If the inflation rate was 3.20% and the nominal interest rate was 4.20% over the last year, what was the real rate of interest over…
- Firms require capital to invest in productive opportunities. The best firms with the most profitable opportunities can attract capital away from inefficient firms with less profitable opportunities. Investors supply firms with capital at a cost called the interest rate. The interest rate that investors require is determined by several factors, including the availability of production opportunities, the time preference for current consumption, risk, and inflation. Suppose the Federal Reserve (the Fed) decides to tighten credit by contracting the money supply. Use the following graph by moving the black X to show what happens to the equilibrium level of borrowing and the new equilibrium interest rate. S2 S1 16 D Equilibrium INTEREST RATE, r (Percent)The only way the investor can get above average profit through investment in different markets by taking advantage of any abnormality when they occur and abnormality can be exploited because there will never be full market efficiency. One more important point that is for most of the investors, a passive, buy-and-hold, long-term strategy is appropriate because capital markets are mostly unpredictable with random movements in price up and down. "and the investment mantra is: - If intrinsic value is more and market price is less buy the security and if it is opposite sell the security Do you think this statement is correct? write your views by giving some examples of different forms.An asset manager and he is overweight in equities because he believes that equities have more upside in the long run. However, he is worried that any negative news regarding COVID-19 may cause a short-term sell off in the stock markets. The asset manager thinks that any sell-off will be limited in size and duration. He is also concerned that implied volatility is very high, so he would like to minimize his vega exposure. Outline 2 different strategies that the asset manager could follow and explain the advantages and disadvantages of each strategy.
- The company is considering hedging its copper production. It thinks that prices are highly likely to rise in the near future, it should a buy itm puts b buy otm puts c sell otm calls d do nothingSuppose that as the economy moves through a business cycle, risk premiums also change. For example, in a recession, when people are concerned about their jobs, risk tolerance might be lower and risk premiums might be higher. In a booming economy, tolerance for risk might be higher and premiums lower.a. Would a predictably shifting risk premium such as described here be a violation of the efficient market hypothesis?b. How might a cycle of increasing and decreasing risk premiums create an appearance that stock prices “overreact,” first falling excessively and then seeming to recover?Ceteris paribus, current financial market returns will increase as _____. Group of answer choices a. the uncertainty about the productivity of capital goods increases and people become more risk averse b. the uncertainty about the productivity of capital goods increases and people become less risk averse c. the uncertainty about the productivity of capital goods decreases and people become more risk averse d. the uncertainty about the productivity of capital goods decreases and people become less risk averse
- 2. If the value of the financial sector is in terms of reducing the individual risk in the economy, how could you measure the value of the financial sector without using information on loan payments (broadly construed to include any interest payment necessary to measure an interest rate or any payment that looks like a return on an investmemt)? If we think of the amount of individual risk remaining after individuals buy portfolios is a measure of the ineffectiveness of the financial sector [or its imperfections], what do you think accounts for these imperfections?WSP Inc. is involved in a wide range of unrelated projects. The company will pursue any project that it thinks will create value for its stockholders. Consequently, the risk level of the company’s projects tends to vary a great deal from project to project. If WSP Inc. does not risk-adjust its discount rate for specific projects properly, which of the following is likely to occur over time? Check all that apply. The firm will increase in value. The firm’s overall risk level will increase. The firm could potentially reject projects that provide a higher rate of return than the company should require. When a project involves an entirely new product line, the firm may be able to obtain betas from to calculate a weighted average cost of capital (WACC) for its new product line. Consider the case of another company. Chrome Printing is evaluating two mutually exclusive projects. They both require a $1 million investment today and have expected NPVs of…Many businesses finance their investment activities internally. Should internal financing affect the efficiency with which the interest rate performs its functions? No, investment is profitable if the expected rate of return is greater than the rate of interest regardless of the source of funds. Yes, investment is profitable if the expected rate of return is greater than the rate of interest regardless of the source of funds. O No, because internal financing relies on a different profit calculation. Yes, because firms are usually more anxious about what happens to money that they do not have to pay back.