Stock price does not change over the life of the option

Assignment Help Financial Management

Reference no: EM131056204

You have purchased a put option on Pfizer common stock. The option has an exercise price of $56 and Pfizer’s stock currently trades at $58. The option premium is $0.50 per contract.

What is your net profit on the option if Pfizer’s stock price does not change over the life of the option?

What is your net profit on the option if Pfizer’s stock price falls to $52 and you exercise the option?

Please provided and explaination of how you got the answer.

Reference no: EM131056204

Questions Cloud

Cost of equipment-shipping and installation : New oven would cost $685,000, including cost of equipment, shipping and installation. No increase in capcity with new oven, however operating expenses would be reduced by $105,000. What is the NPV of the 2 projects and which should be accepted? The f..

Describe the functions of the organization : I want you to choose topic "Global Warming" for this assignment and also write it as a report to the organisation that you will chose. Describe the functions of the organization. Data justifying the need for the initiative

Starting one year after you buy the investment : An investment that will pay you $2,000 each year for the next 25 years, starting one year after you buy the investment. An investment that will pay $2,000 to you now, and to your heirs (children, grandchildren, any one else) forever Assuming that you..

Insurance-about the new policy : Insurance An Insurance company is offering a new policy to its customers. Typically, the policy is bought by a parent or grandparent for a child at the child’s birth. When the child reaches age 65, he or she receives $350,000. If the relevant interes..

Stock price does not change over the life of the option : You have purchased a put option on Pfizer common stock. The option has an exercise price of $56 and Pfizer’s stock currently trades at $58. The option premium is $0.50 per contract. What is your net profit on the option if Pfizer’s stock price does n..

What is the portfolio beta and required return : An investor has put money in four stocks in the dollar amounts indicated and with betas specified. What is the portfolio beta? Stock A $3,780 with a beta of 1.03; stock B $7,411 with a beta of 1; stock C $5,584 with a beta of 1.03; and stock D $5,895..

What is the ytm-stated on nominal-annual-basis : The current market price of Smith Corporation's 8 percent coupon, 8 year bonds is $1,125.61. An 8% coupon rate is paid semi-annually, and the par value is equal to $1,000. What is the YTM (stated on a nominal, annual, basis) if the bonds mature 8 yea..

Gordon or constant growth dividend discount : If the constant growth ("Gordon" or "Constant Growth Dividend Discount") model is to give a reasonablea valuation of a stock, which of the following is not a valid assumption for the model?

Target debt–equity ratio-annual cash flows : Blue Angel, Inc., a private firm in the holiday gift industry, is considering a new project. The company currently has a target debt–equity ratio of .35, but the industry target debt–equity ratio is .30. The project will be financed at Blue Angel’s ..

User Account

All Pages