Is this put option in or out of the money

Assignment Help Financial Management
Reference no: EM13951569

A) A put option on Macrohard stock with a strike price of $36 has a time value of $1.50, and a premium of $4.00. What must be the price of the stock? Show your calculations.

b. Is this put option in or out of the money? Explain.

c. Explain thoroughly why increased volatility in the underlying stock price increases the premium of an option.

Reference no: EM13951569

Questions Cloud

Define conscientious objection according to the us military : Define conscientious objection according to the U.S. military. Evaluate the current U.S. military policy towards conscientious objection. Consider the following questions in your evaluation: Do you believe that conscientious objection is morally perm..
A portfolio manager in charge of a portfolio worth : A portfolio manager in charge of a portfolio worth $50 million is concerned that the market might decline rapidly during the next six months and would like to use options on the S&P 100 to provide protection against the portfolio falling below$45 mil..
What is the aftertax salvage value of the equipment : Kolby’s Korndogs is looking at a new sausage system with an installed cost of $910,000. This cost will be depreciated straight-line to zero over the project’s seven-year life, at the end of which the sausage system can be scrapped for $105,000. What ..
Evaluate the working capital efficiency of santos : Evaluate the working capital efficiency of Santos in 2014 as compared to 2013 by referring to Source 1 - What type of financing strategy do you believe Santos is taking to fund its working capital over 2013-2014 based on their financial risk manage..
Is this put option in or out of the money : A put option on Macrohard stock with a strike price of $36 has a time value of $1.50, and a premium of $4.00. What must be the price of the stock? Show your calculations. Is this put option in or out of the money? Explain.
Explain why this is ethical concern for conducting research : Research your topic and explain why this is an ethical concern for conducting research in industrial/organizational (I/O) settings. Review the APA code of ethics as it pertains to your topic and report your findings
Cost of new common stock financing is higher than the cost : The cost of new common stock financing is higher than the cost of retained earnings due to _____.
Explain what wireless modulation schemes are and why : Explain what wireless modulation schemes are and why they are necessary in wireless networking.
Financing activities section of the statement of cash flows : Which of the following would be considered a cash inflow in the financing activities section of the statement of cash flows?

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate the NPV-PI and IRR

(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,800,000, and the project would generate in..

  What is the price of the combined test assuming

When the tests are combined, only one syringe, form, and sterile ban­dage will be used. Furthermore, only one charge for breakage/losseswill apply. Two blood vials are required, and reagent costs will remainthe same (reagents from all three tests ..

  Measure the cost of the common stock

When measuring the cost of capital, many companies measure the cost of the common stock in the company. However, does common stock have a cost when there is no obligation to pay the stockholders except upon liquidation of the company?

  Prepare the monthly adjusting entries

Batman Company prepares monthly financial statements. Below are listed some selected accounts and their balances in the September 30 trial balance before any adjustments have been made for the month of September.An analysis of the account balances by..

  Sales for the first quarter of the year

Purchases are equal to 50% of the following quarter's sales. The sales for the first quarter of the following year are estimated at $2,100. The accounts receivable period is 30 days and the accounts payable period is 45 days. The firm will purchase _..

  Expected return-Returns on the two stocks have correlation

Stocks A and B each have an expected return of 12%, a beta of 1.2, and a standard deviation of 25%. The returns on the two stocks have a correlation of +0.6. Portfolio P has 50% in Stock A and 50% in Stock B.

  Firm is considering project that would change firm values

ATC has a value of $70,000 in a good economy and $55,000 in a recession. The firm has $60,000 of debt. The probability of a recession is 50 percent. The firm is considering a project that would change the firm values to $73,000 in a good economy and ..

  Long-term government bonds are normally distributed

Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.7 percent and a standard deviation of 10 percent. What is the probability that your return on these bonds will be le..

  The equipment is worth-what is the cost of owning

Waldrop Corporation must install $200 of new equipment in its Ohio plant. It can obtain a bank loan for 100% of the required amount at 9% interest on the loan. Assume that Waldrop's tax rate is 34% and that the equipment's depreciation would be $100 ..

  Explain how these events would be accounted

Explain how these events would be accounted for and disclosed in accordance with the requirements of AASB 110.

  Calculate labor rate and efficiency variances for the months

Prepare both the variable and the absorption costing income statements for January (b) Explain any difference between the net incomes (if any) under both methods.

  Prepare the financial statements

Prepare a three page paper that responds to the coca-cola research case questions Using the web, access the Coca-Cola Company's 2010 financial statements

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd