Arithmetic and geometric average returns for stock

Assignment Help Financial Management

Reference no: EM132059273

1. Boeing Corporation imported a Rolls-Royce jet engine for £8 million payable in one year. In the over-the-counter market, Boeing purchased a call option on 8 million British pounds with an exercise price of $1.45/£ and a one-year expiration. The option premium is $0.05/£.

If the spot exchange rate is $1.48/£ on the expiration date, what is the amount of U.S. dollars paid on the expiration date after the premium (the upfront cost)? The one-year U.S. interest rate is $2.5%. (Note the time value of money is considered in the upfront cost paid.) (Points : 3.3)

a 11,600,000

b $12,010,000

c $12,250,000

d $11,190,000

e $11,430,000

2. What are the arithmetic and geometric average returns for a stock with annual returns of 22 percent, 9 percent, -7 percent, and 13 percent?

3. Suppose that you have been offered two packages. Package A contains 1000 call options at strike price of $182. Package B contains 100 call options at strike price of $80. Suppose stock price next year could be $100 with probability 0.75 and $200 with probability 0.25. Suppose that you are risk neutral. Which package would you choose.

Reference no: EM132059273

Questions Cloud

Until retirement and have just started your first job : Assume that you have 40 years until retirement and have just started your first job

Changing the characteristics within the organization : Explain your approach to changing the characteristics within the organization. Be sure to create some type of framework for your approach, not just a series

How do treatments for the two disorders compare : How does the pathophysiology of inflammatory bowel disease compare to the pathophysiology of irritable bowel syndrome?

How do i find how fast the balloon is ascending : The balloon is ascending at the rate of how many m/sec? How do I find how fast the balloon is ascending?

Arithmetic and geometric average returns for stock : What are the arithmetic and geometric average returns for a stock with annual returns of 22 percent, 9 percent, -7 percent, and 13 percent?

Find the volume of the solid obtained from the region : From the functions can someone help me try and find the volume of the solid obtained from the region I do no know how to being the problem or draw the shape.

Sided limits and arguing the reason : By completing all relevant one-sided limits and arguing the reason?

Explain why the selected questions are necessary : Assume you are the information system manager at a community clinic in the kingdom of Saudi Arabia that currently is completely paper-based.

Explaining the market structure of st marys hospital : Prepare a paper explaining the market structure of St. Mary's Hospital - How the hospital services are priced and why they are priced this way

User Account

All Pages