The stock of Global Consolidated Meganormo Corp. presently sells for $73 per share. You believe that the stock price is likely to drop, and so you buy a $60 put option for 500 shares. The option premium is $2. How will you make out if the stock price drops to (a) $50 and (b) $60
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The stock of Global Consolidated Meganormo Corp.
presently sells for $73 per share. You believe that the stock
price is likely to drop, and so you buy a $60 put option for
500 shares. The option premium is $2. How will you make out
if the stock price drops to (a) $50 and (b) $60
Step by step
Solved in 4 steps
- The current market price for common shares of Getgo Company is $15. Put options on these shares currently trade at 0.75 and come with a $10 strike price. If the stock’s market price falls to $8.45 what would be the dollar return earned on these put options? Your answer should look like this 1.2 that is not the right answerThe current stock price of Sanders is at $35. A put on Sanders stock with a strike price of $35 is priced at $8 per share while a call with a strike price of $35 is priced at $8. If you implement a covered call strategy today and the stock price decrease to $32, what is your total profit or loss (assuming you implement the strategy using 100 shares)?The current market price for common shares of Funny Company is $15. Put options on these shares currently trade at 0.50 and come with a $10 strike price. If the stock’s market price falls to $8 what would be the percentage rate of return earned on these put options? your answer should look like this 200 that is not the right answer
- The current market price for common shares of ABC Company is $25. Call options on these shares currently trade at 1.50, and come with an $30 exercise price. If the stock’s market price rose to $35 what would be the dollar payoff? your answer should like this: 4.00 that is not the right answerThe stock of Suncor Energy is currently trading for $36 per share. An investor expects the stock price to move up in the next two months, and decided to invest $7, 200 in this stock. If the investor invests all the money in the stock, how much is the profit or loss if the stock price in two months turns out to be i) 40 or ii) 32? If the investor invests all the money in call options with a strike price of $35 and price of the call is $2 per share, how much is the profit or loss if the stock price in two months turns out to be i) 40 or ii) 32?Suppose you have 100 common shares of Tillman Industries. The EPS is $4.00, theDPS is $2.00, and the stock sells for $60 per share. Now Tillman announces a twofor-one split. Immediately after the split, how many shares will you have, what willbe the adjusted EPS and DPS, and what would you expect the stock price to be?
- Assume the price of Home Depot stock is trading for $325 per share. You believe the price is too high. If the share price falls by 5%, you would like to buy the stock. What type of trade should you execute and at what price will the trade happen?If you place a stop-loss order to sell at $52 on a stock currently selling for$55.50 per share, what is likely to be the minimum loss you willexperience on 100 shares if the stock price rapidly declines to $49.50 pershare? Explain. What if you had placed a stop-limit order to sell at $52,and the stock price tumbled to $49.50?Suppose that an investor buys a 100-share put option for $150. It has an exercise price of $38 and the underlying price per share of the stock at expiration is $39. What is the investor's amount of profit or loss, ignoring brokerage fees? and A firm is in need of $2 million in new long-term financing. The firm is trying to decide whether to sell common stock or a convertible bond. The market price of the common stock at present is $42 per share. In order to sell this new issue, the stock has to be underpriced by $2 and sold for $40 per share. Currently the firm has 300,000 shares of common stock outstanding. The firm could also issue 20-year, 10 percent, and $1,000 par-value convertible bonds. They would set the conversion price at $50 per share, and the bond could be sold at par. The earnings for the firm should be $500,000 in the coming year. If the firm chooses the sale of common stock, what will the earnings per share in the coming year be?
- Suppose you decide that the Bear Company stock is selling at too high a price at its current $50 per share price. You are convinced that the price of Bear stock will fall in the next couple of months, so you decide to sell 100 shares of Bear stock short. Ignoring transactions costs, if the Bear Company does not pay dividends, what is your profit or loss if the stock’s price goes to: $40 and you buy at that price to cover your short?A stock sells for $15 per share. You purchase 100 shares for $15 a share (i.e., for $1,500), andafter a year the price rises to $18.75 a) What will be the percentage return on your investment ifyou bought the stock on margin and the margin requirement was 65 percent? (Ignore commissions, dividends, and interest expense.) b) Rather than selling for $18.75, determine the percentage return on your investment if the price of the stock falls to $12.30 Based on your answers to both questions, what generalization on the use of marginaccounts can be inferred?Travis Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $88.00, but flotation costs will be 8% of the market price, so the net price will be $80.96 per share. What is the cost of the preferred stock, including flotation? Round your answer to two decimal places.
