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You have purchased a put option on Pfizer common stock. The option has an exercise price of $40 and Pfizer’s stock currently trades at $42. The option premium is $0.70 per contract.
A. What is your net profit on the option if Pfizer’s stock price does not change over the life of the option?
B. What is your net profit on the option if Pfizer's stock price falls to $34 and you exercise the option?
Find the final amount when $1500 is deposited at the end of each quarter at 7.4% compounded quarterly for 15 years then $1000 is deposited at the end of each quarter at 4.3% compounded quarterly for 10 years
Mitchell Bancorp is considering making a loan at 3% interest (c/a) to SohnCo to buy a machine tool worth $300 million. The tool has no salvage value and is depreciated over 3 years by sum-of-years digits. In this state, SohnCo pays 50% tax. The befor..
You want to borrow $72,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,300, but no more. Required: Assuming monthly compounding, what is the highest rate you can afford on a 72-month APR loan?
No law prohibits citizens in a state that does not sponsor a state-operated lottery from purchasing lottery tickets in a state that does have such a lottery. Georgia did not have a state-operated lottery, so John and several other Georgia residents a..
Hart Enterprises recently paid a dividend, D0, of $3.25. It expects to have nonconstant growth of 15% for 2 years followed by a constant rate of 5% thereafter. The firm's required return is 19%. What is the horizon or terminal value?
An energy efficient pump is proposed by a vendor. The pump will cost $45,000 installed, and will require $2,000 worth of maintenance each year for its life of 15 years. Energy costs will be $6,000 per year. A standard pump will cost $25,000 and will ..
Lohn Corporation is expected to pay the following dividends over the next four years: $14, $10, $9, and $4.50. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 10..
You have recently purchased stock in Topical Inc. which has returned between 5% and 9% over the last three years. Your friend, Bob, has criticized your purchase and insists that you should have invested in Combs Inc., as he did, because it's been ret..
Given the utility function U = E(r) – 0.5Aσ2 and the fact that T-bill offer a risk-free rate of 4%, what is the minimum value for the risk-aversion coefficient A where an investor prefers the T-bills to an investment returning 10% with a standard dev..
The firm X has a 45 day accounts payable period. The firm has expected sales of $1,800, $2,500, $2,600 and $2,800, respectively, by quarter for the next calendar year. The cost of goods sold for a quarter is equal to 55% of the next quarter sales. Wh..
Yesterday, Enviromax Systems paid a dividend of $5. You expect that dividends will grow at a rate of 6% per year. Shareholders' required rate return is 9%. According to the Dividend Discount Model, what should be the price of the stock? Assume that a..
Your firm has an average receipt size of $60. A bank has approached you concerning a lockbox service that will decrease your total collection time by 1 day. You typically receive 25,000 checks per day. The daily interest rate is 0.016 percent. What i..
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