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Gold is currently trading for about 1,300 per ounce. You are considering 3 ways of taking a short position on gold: (i) sell 100 ounces of gold short, (ii) take a short position in 1000 gold futures (September 2014), (iii) buy a futures put options on 1000 gold futures at K=1300 (September 2014). (a) If you enter the above positions when gold equals 1,300, compare the dollars in profit from the three ways of betting against the price of gold if gold ends up at the following prices at time t: 1100, 1150, 1200, 1250, 1300, 1350, 1400, 1450, 1500, 1550 (Note: you should assume the price of one futures put option is $10). (b) Draw a diagram showing the profits for each position for each price of gold. (c) Which option has the lowest risk? Explain
If an investor buys shares in a closed-end investment corporation for $46 and the net asset value is $53, determine the discount? If the company distributes $1, net asset value increase to $58.
Jean Splicing will receive $50,000 in 50 years or $2,000 today. If long-term rates are 7 percent, what choice would you recommend? Find out the current value of the future payments
Two machines, A and B, which carry out the same functions, have the following costs and lives. Which machine would you choose? Justify your decision.
The basket of goodies expenses $300, and is expected to cost $515 next year. The real rate of interest is 2%. Our company, Basic, Inc. has a bond risk premium of 2.5 percent and a preferred stock risk premium of 3 percent.
Analyze the past monthly movements in IBM's stock
How are the tests of controls, substantive tests of transactions, and analytical procedures for sales and collection cycle, payroll and personnel cycle, and acquisition and payment cycle similar?
If you are a family of four how would you calculate how much life insurance you would need to protect your financial future?
Reducing plan drafting costs is to use a master or prototype plan.
The Preston Toy Co has warrants outstanding that permit the holder to purchase a share of stock for $22. The common stock is currently selling for $28,
If the Fed decides to raise interest rates next year, what effect would rising rates have upon the following: (1) Consumer financing for big-ticket items such as autos and homes; (2) the present and future values of annuities; (3) the NPV calculat..
How much can a company's short-term debt(notes payable) increase without pushing its current ratio below 2.0? What will be the firm's quick ratio after Nelson has raise the maximum amount of short-term funds?
Suppose the U.S. interest rate is 7.5%, the New Zealand interest rate is 6.5%, the spot rate of NZ$ is $.52, and the one? Year forward rate of the NZ$ is $.52. At the end of the year, the spot rate is $.48
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