Calculate your percentage return on the put option

Assignment Help Business Economics
Reference no: EM131011166

Suppose you have $66,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $100 per share. You notice that a put option with a $100 strike is also available with a premium of $6.6. Calculate your percentage return on the put option for the six-month holding period if the stock price declines to $94 per share. (Round your answer to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required. Omit the "%" sign in your response.)

Reference no: EM131011166

Questions Cloud

Debt level will produce the desired eps : Tanenbaum's stock sells at book value. Will trading equity for debt help the firm achieve its EPS goal, and if so, what debt level will produce the desired EPS?
Current level of profitability : a. At the current level of profitability, will more debt enhance results? Why? b. Calculate the EAT, ROE, EPS, and the DFL at the current and proposed structures, and display your results in a systematic table.
Amount of change between levels : Compare the EPS at the different leverage levels, and the amount of change between levels as leverage increases. What happens to the effect of more debt as leverage increases from a little to a lot?
Find the cash coverage ratio : Hedgepeth Inc.’s net income for the most recent year was $16,885. The tax rate was 40 percent. The firm paid $3,976 in total interest expense and deducted $2,655 in depreciation expense. What was the cash coverage ratio for the year? Find the cash co..
Calculate your percentage return on the put option : Suppose you have $66,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $100 per share. You notice that a put option with a $100 strike is also available with a premium of $6.6. Calculate your per..
Required return on the riskier stock exceed required return : Stock R has a beta of 1.0, Stock S has a beta of 0.55, the expected rate of return on an average stock is 13%, and the risk-free rate is 7%. By how much does the required return on the riskier stock exceed the required return on the riskier stock exc..
Advisability of restructuring capital under these conditions : a. Reconstruct the three-column chart assuming Connecticut's EBIT remains at $8,000. b. Interpret the result in terms of stock price and the advisability of restructuring capital under these conditions. c. Could these results have been predicted ..
Set up a diagram showing the firms total revenue : Set up a diagram showing the firms total revenue and total cost schedules. In this diagram, show the points at which the firm is maximizing profits.
What earnings management strategy : During the first quarter, we made several decisions resulting in a $13 million charge to earnings. A new accounting pronouncement, FAS 121, required the Company to take a $7.5 million charge. What earnings management strategy appears to have been use..

Reviews

Write a Review

Business Economics Questions & Answers

  Calculate value of t that maximizes governments tax revenue

A monopolist faces a demand function x = 1/2( 11-p) where p is the price of the product and x is the quantity demanded. The monopolist has a cost function 3+2x. The government impose a tax of t per unit of output. Assuming that the monopolist maximiz..

  Nominal anchors in the long run

Explain the main differences between the three main nominal anchor choices presented in Chapter3: i) Exchange Rate Target; ii) Money supply target; and iii) Inflation target plus interest rate policy. Use equations to support your answer and do not f..

  Explain how the law of diminishing marginal utility

Thinking of your own consumer tendencies, provide an example and explain how the law of diminishing marginal utility applies to your personal consumption patterns and how the utility-maximization rule and the income and substitution effects play a ro..

  Sketch the firm isoquant and isocost lines

Sketch the firm's isoquant and isocost lines and show its current equilibrium in the use of labor and machines when producing 200 gizmos per month.

  Decides to operate on the basis of majority-rule

Consider a committee of Ann, Bob, and Carol that is choosing between three alternatives, {x, y, z}. Player i’s preferences are represented by the ordering i . Suppose the three player’s preferences are: x A y A z. y B z B x. z C x C y. Each player ha..

  What are implications for investors and for public policy

Besides raising taxes and issuing debt, the U.S. government (Treasury Department) can also secure funds by borrowing directly from the FED. What is the potential danger of this route? What are the implications for investors and for public policy of e..

  Suppose there are two consumers of public good

Suppose there are two consumers of a public good, Barbie (B) and Ken (K). Their demand curves for the good are given by: Graph Barbie’s demand curve. What is the slope? Graph Ken’s demand curve. What is the slope?

  Determine how many passengers will result in the max revenue

Assuming 20 people sign up for the cruise, determine how many passengers will result in the max revenue. What is the max revenue? What is the fare per passenger?

  Responsible for setting the naaqs for lead

If you were responsible for setting the NAAQS for lead, what key determinants would you consider if the standard were established to meet the efficiency criterion. Be sure to itemize separately the benefits and costs associated with your decision.

  Market structure problem

What is the new equilibrium price and output in the short run for both the industry and each firm.

  Alternative price indexes

Because there isn't one single measure of inflation, the government and researchers use a variety of methods to get the most balanced picture of how prices fluctuate in the economy. Two of the most commonly used price indexes are the consumer price i..

  Markets exist to facilitate exchange between people

Two goods are substitutes if an increase in the price of one good leads to an increase in demand for the other. The market system works by getting each person, motivated by his or her own self-interest, to produce products for other people. Markets e..

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