What effect would the fact that the price of carlisle stock

Assignment Help Finance Basics
Reference no: EM131132085

Ed Martin, the pension fund manager for Stark Corporation, is considering purchase of a put option in anticipation of a price decline in the stock of Carlisle, Inc. The option to sell 100 shares of Carlisle, Inc., at any time during the next 90 days at a striking price of $45 can be purchased for $380. The stock of Carlisle is currently selling for $46 per share.

a. Ignoring any brokerage fees or dividends, what profit or loss will Ed make if he buys the option and the lowest price of Carlisle stock during the 90 days is $46, $44, $40, and $35?

b. What effect would the fact that the price of Carlisle's stock slowly rose from its initial $46 level to $55 at the end of 90 days have on Ed's purchase?

c. In light of your findings, discuss the potential risks and returns from using put options to attempt to profit from an anticipated decline in share price.

Reference no: EM131132085

Questions Cloud

Write the program with indentation and formatting style : Write the program with indentation and formatting style as discussed in class, and given in the program requirement. Write documentation for your programs as discussed in class and given in the program requirement.
What basis can hr leadership provide a logical rationale : Write specific criteria (4-5) that could be used to assess potential opportunities that warrant change in the HR Operating Plan brought to HR by the CEO and provide rationale for your assessment criteria selection, e.g., alignment with the busines..
Prepare the entry for the issuance under the following : The stock had a par value of $5 per share and was issued to attorneys for services during incorporation valued at $52,000.
Evaluate the components of the course project exercise : State one important takeaway you learned from the organization that you examined for your Course Project.  Evaluate the components of the Course Project exercise. Explain whether you feel this Course Project would be applicable in the real world for ..
What effect would the fact that the price of carlisle stock : Ignoring any brokerage fees or dividends, what profit or loss will Ed make if he buys the option and the lowest price of Carlisle stock during the 90 days is $46, $44, $40, and $35? What effect would the fact that the price of Carlisle's stock slowly..
Describe which trends most significantly impact organization : Briefly describe which trends would most significantly impact the organization that you chose for your Course Project. (My organization I chose is Caterpillar, Inc.)
Define dummy variable and give two examples : Define dummy variable and give two examples. Analyze the three different types of data (cross-sectional, time series, panel data)
Design a gui program to find weighted average of four test : Design a GUI program to find the weighted average of four test scores. The four test scores and their respective weights are given in the following format.
Describe the nondisclosure parameters of this agreement : Identify how these parameters could help safeguard your organization (Caterpillar, Inc.) from the intentional and/or unintentional dissemination of trade secrets by senior executives.

Reviews

Write a Review

Finance Basics Questions & Answers

  The dividend payout ratio will be 40 and return on equity

a stock will not pay dividends until three years from now. the dividend then will be 2.00 per share the dividend

  Evaluate and choose health care insurance options

Describe two (2) steps you should take to evaluate and choose health care insurance options. Describe one (1) consideration you should take into account when looking into the option of private health care insurance.

  Suppose you know that a companys stock currently sells for

suppose you know that a companys stock currently sells for 59 per share and the required return of the stock is 11.

  Southern tours is considering acquiring holiday vacations

southern tours is considering acquiring holiday vacations. management believes holiday vacations can generate cash

  The marginal tax rate is 35 percent and appropriate

archer daniels midland company is considering buying a new farm that it plans to operate for 10 years. the farm will

  Whited incs stock currently sells for 3525 per share the

whited incs stock currently sells for 35.25 per share. the dividend is projected to increase at a constant rate of 4.50

  Calculate the current share price

The required rate of return on the shares in the firms identified in parts (i) to (ii) is 15% per annum (discount rate). Calculate the current share price in each part.

  The physical damage to the parked car

Pablo traded in his 2000 Ford for a new Ford. One week later, he hit an oily spot in the road on his way to work and skidded into a parked car. The 2000 Ford was insured under the PAP with full coverage, including a $250 deductible for a collision..

  Complete the following exercise submit journal entries in

complete the following exercise. submit journal entries in an excel file and written segments in an ms word document.

  Why stock market indicated by various market indexes

Why do you think the stock market, as indicated by various market indexes, can experience significant gains while unemployment stays high? Be sure to base your response on sound economic theory.

  Calculating the proceeds of selling bonds

Taylor Corp. sells $400,000 of bonds to private investors. The bonds are due in five years, have an 8% coupon rate, and interest is paid semiannually. The bonds were sold to yield 6%. What proceeds does Taylor receive from the investors?

  Explain the rationale behind this method

Some firms prefer to use debt or preferred stock for financing to retain control. Explain the rationale behind this method.

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