XYZ purchased a call option 3 months ago for $300 ($3 per share). It gives XYZ the right to buy 100 shares in Morley Tobacco for $20 per share. The call option expires today. What is the lowest price that XYZ should exercise at and what is that lowest price at which XYZ would realize a profit?
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XYZ purchased a call option 3 months ago for $300 ($3 per share). It gives XYZ the right to buy 100 shares in Morley Tobacco for $20 per share. The call option expires today. What is the lowest price that XYZ should exercise at and what is that lowest price at which XYZ would realize a profit?
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- You decide to sell short 100 shares of Charlotte Horse Farms when it is selling at its yearly high of R56. Your broker tells you that your margin requirement is 45 percent and that the commission on the purchase is R155. While you are short the stock, Charlotte pays a R2.50 per share dividend. At the end of one year, you buy 100 shares of Charlotte at R45 to close out your position and are charged a commission of R145 and 8 percent interest on the money borrowed. What is your rate of return on the investment?You decide to sell short 100 shares of Charlotte Horse Farms when it is sell at its yearly high of R56. Your broker tells you that your margin requirement is 45 percent and that the commission on the purchase is R155. While you are short the stock, Charlotte pays a R2.50 per share dividend. At the end of one year, you buy 100 shares of Charlotte at R45 to close out your position and are charged a commission of R145 and 8 percent interest on the money borrowed. What is your rate of return on the investment?Al Rodriguez sells 500 shares of Gold Mine Corp. short at $80 per share. The margin requirement is 50 percent. The stock falls to $62 over a three-month time period, and he closes out his position. How much is his initial margin? What is his percentage gain or loss on his initial margin? If he is in a 35 percent tax bracket for short-term capital gains and a 15 percent bracket for long-term capital gains, what is his tax obligation? If the stock went up to $94 instead of down to $62, what would be his dollar loss? Assuming this is his only transaction for the year, how large a tax deduction could he take against other income?
- Mr. Wa Is believes that ABC Co.’s stock price is going to decline from its current level of P82.50 sometime during the next 5 months. For P510.25 he could buy a 5-month put option giving him the right to sell 100 shares at a price of P83 per share. If he bought a 100 share contract for P510.25 and ABC Co.’s stock price actually dropped to P63, what would be his net profit (after transactions costs but before taxes)? A. P1,439.75 B. P1,489.75 C. P1,950.00 D. P2,000.00 E. P2,435.00Lauren has a margin account and deposits $49,994 into it. Assume the prevailing margin requirement is 40%, interest and commisions are ignored, and the Gentry Wine Corporation is selling at $35 per share. a) How many shares can Lauren purchase using the maximum allowable margin? b) What is Lauren's profit (loss) if the price of Gentry's stock 1) rises to $45 and Lauren sells the stock? 2) falls to $25 and Lauren sells the stock? c) If the maintenance margin is 30% to what price can Gentry Wine fall before Lauren will receive a margin call?Buyer Company bought 100 options of Target Co one year ago and would like to exercise them today. The options were purchased at $24 each, and they expire when trading ends today (assume there is no speculative premium left.) Target common stock is selling today for $50 per share. The exercise price is $30 and each option entitles the holder to purchase two shares of stock, each at the exercise price. If the options are exercised today, what would Buyer Company’s dollar profit or loss be?
- You decide to sell short 100 shares of Github Industries when it is selling at its yearly high $56. Your broker tells you that your margin requirement is 45 % and that the commision on the purchase is $155. While you are short the stock, Github pays a $2.50 per share dividend. At the end of one year, you buy 100 shares of Github at $45 to close out your position and are charged a commision of $145 and 8 % interest on the money borrowed. What is your rate of return on the investment?Suppose that Tesla stock is currently selling at $270 per share. For each of the following situations (ignoring brokerage commissions), calculate the gain or loss that Olivia Crowe realizes if she makes a 100-share transaction. She sells short and repurchases the borrowed shares at $295 per share. She takes a long position and sells the stock at $295 per share. She sells short and repurchases the borrowed shares at $255 per share. She takes a long position and sells the stock at $255 per share.You decide to sell short 300 shares of Charlotte Horse Farms when it is selling at its yearly high of $56. Your broker tells you that your margin requirement is 50 percent and that the commission on the purchase is $480. While you are short the stock, Charlotte pays a $2.25 per share dividend. At the end of one year, you buy 300 shares of Charlotte at $42 to close out your position and are charged a commission of $460 and 8 percent interest on the money borrowed. What is your rate of return on the investment? Do not round intermediate calculations. Round your answer to two decimal places
- Lambergeeny Inc. has decided to go public by selling $5,000,000 of new common stock. Its investment bankers agreed to take a smaller fee now (6% of gross proceeds versus their normal 10%) in exchange for a 1-year option to purchase an additional 200,000 shares at $5.00 per share. The investment bankers expect to exercise the option and purchase the 200,000 shares in exactly one year, when the stock price is forecasted to be $6.50 per share. However, there is a chance that the stock price will actually be $12.00 per share one year from now. If the $12 price occurs, what would the present value of the entire underwriting compensation be? Assume that the investment banker's required return on such arrangements is 15%, and ignore taxes.a) Jessie B. purchases 450 shares of Smooth Sail Inc. for $50 per share at a time when the initial marginrequirement is 60%. After two months, seeing that the price of Smooth Sail has fallen to $40 per share,Jessie wishes to buy an additional 200 shares. By this time, the initial margin requirement has gonedown to 50%. Will Jessie be able to do some pyramiding? What is the amount of margin he will berequired to provide for his second transaction? Support your answer with relevant calculations.Prahm Corporation wants to raise $3.9 million via a rights offering. The company currently has 470,000 shares of common stock outstanding that sell for $35 per share. Its underwriter has set a subscription price of $23 per share and will charge the company a 5 percent spread. If you currently own 6,650 shares of stock in the company and decide not to participate in the rights offering, how much money can you get by selling your rights?