If the yz company stock goes to 16 what is the option worth

Assignment Help Finance Basics
Reference no: EM13484621

You can buy XZ Company stock at $30 a share, or $3,000 for 100 shares. You can acquire a $33 3-month call for $400. Thus, you could invest $2,600 cash and have the opportunity to buy 100 shares at $33 per share. Assume, however, that you decide to invest your $2,600 in a 3-month CD earning 14 percent interest. The CD will return $91 (14% × $2,600 × 3/12).

(a) If the YZ Company stock goes to $16, what is the option worth.

(b) If the stock goes to $43, would there be a gain or loss?

Reference no: EM13484621

Questions Cloud

Master corporation wants to buy certain fixed assets of : master corporation wants to buy certain fixed assets of smith corporation. however smith corporation wants to dispose
Efficient markets hypothesis what are the implications of : efficient markets hypothesis what are the implications of the efficient markets hypothesis for investors who buy and
Yohai corporation is thinking of purchasing klein : yohai corporation is thinking of purchasing klein corporation for 70000 in cash. yohais current cost of capital is 16
All of quarter foods sales to businesses are on account : quarter foods began its operations january 1 2014. as its food does not go bad quarter foods return policy is that
If the yz company stock goes to 16 what is the option worth : you can buy xz company stock at 30 a share or 3000 for 100 shares. you can acquire a 33 3-month call for 400. thus you
Ejh has a beta of 12 csh has a beta of 06 and kms has a : ejh has a beta of 1.2 csh has a beta of 0.6 and kms has a beta of 1.0. if you put 25 of your money in ejh 25 in csh
Great northern oil shale company is a company actively : great northern oil shale company is a company actively engaged in the oil services industry. the company provides
Custom publishers company specializes in print-on-demand : custom publishers company specializes in print-on-demand books. the company needs information to budget next years
Drake corporations convertible bond has a conversion price : drake corporations convertible bond has a conversion price of 90. the conversion ratio is 15. the market price of the

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculation of cost of capital for western communications

Calculation of cost of capital for Western Communications

  The important points with optimistic entrepreneurs

Assume you have decided to become a venture capitalist, but you are worried about capital losses and lower rate of return.

  Different between how treasury bonds are traded in asx

What is different between how treasury bonds are traded in ASX with how they traded in Australian bond market?

  Identify and explain three types of earnings management

identify and explain three types of earnings management that can reduce earnings

  Consider a bond with face value of 2000 which pays a 4

1.we typically claim that stock prices are equal to the present value of their payoffs. what dynamics in the real world

  What would be recorded in the common stock account

What would be recorded in the common stock account on the balance sheet if 20,000 shares are issued at a par value of $2 and the market value is $5?

  Analyzing the use of databases in a large bank

I need help analyzing the use of databases in a large bank or collection call center. I need examples and descriptions of known database applications that are used

  Objective type questions on cost of capital and wacc

Objective type questions on cost of capital and WACC and he company currently has no debt in its capital structure

  Determine will the company accept the project

High-Top, Inc. is considering a four-year project that has an initial after-tax outlay cost of $120,000. The future cash inflows from its project are $25,000, $30,000, $35,000 and $32,000 for years 1, 2, 3 and 4,

  Compute the price in us dollars

Chamberlain Canadian Imports has agreed to buy 15,000 cases of Canadian beer for four million Canadian dollars at today's spot rate. The firm's financial manager, James Churchill, has noted the following current spot and forward rates:

  Voting for directors selection

Galaxy Company is holding a stockholders' meeting next month. Mr. Starr is the president of the company and has the support of the existing board of directors.

  What is the npv of the project

Suppose your required return on the project is 9 percent and your pretax cost savings are $193,000 per year. What is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) NPV $ Requi..

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