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A call option on US dollars with a strike price of £0.60 is purchased by a speculator for a premium of £0.06 per unit. Assume there are 50 000 units in this option contract. If the US dollar's spot rate is £0.65 at the time the option is exercised, what is the net profit or loss per unit to the speculator if the option were to be exercised now? What is the net profit or loss for one contract? What would the spot rate need to be at the time the option is exercised for the speculator to break even? What is the net profit per unit to the seller of this option if exercised now?
At the end of 2011, the value of my savings account was $20,000. Over the next three years, the rates of return on the account were as shown below. How much was in the account at the end of the third year, 2014?
You own a stock portfolio invested 10 percent in stock Q, 25 percent in stock R, 50 percent in stock S, and 15 percent in stock T. The betas for these four stocks 1.4, .6, 1.5, and .9, respectively. What is the portfolio beta?
You're trying to save to buy a new $140,000 Ferrari. You have $39,000 today that can be invested at your bank. The bank pays 3.5 percent annual interest on its accounts. How long will it be before you have enough to buy the car?
The rates given here include the risk-free rate, rRF, and appropriate risk premiums. Today a three-year bond that is, a bond that matures on December 31, 2014- has an interest rate equal to 6 percent. What is the yield to maturity for bonds that matu..
The yield to maturity on a bond is the rate of return that equates to the present value of the bond's future cash flows with the bonds
A trader buys 200 shares of a stock on margin. The price of the stock is $20. The initial margin is 60% and the maintenance margin is 30%. How much money does the trader have to provide initially? For what share price is there a margin call?
Suppose that a mining operation has spent $8 million developing an ore deposit in South America. Current expectations are that the deposit will require 2 years of development and will result in a realizable cash flow of $10 million at that time. ompu..
Assume that a taxpayer purchases a computer in 2014 that has an estimated useful life of 10 years. If the computer is used 100 percent for business and no election to expense was made, what is the MACRS recovery period that must be used for cost reco..
Cheeseburger and Taco Company purchases 9,497 boxes of cheese each year. It costs $18 to place and ship each order and $8.83 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. Calculate ..
You plan to start saving for your son’s college education. He will begin college when he turns 18 years old and will need $4,000 at that time and in each of the following three years. You will make a deposit at the end of this year in an account that..
In December 1995 Boise Cascade’s stock had a beta of 0.95. The Treasury bill rate at the time was 5.8% and the Treasury bond rate was 6.4%. Assume the term structure of interest gives a 200 bp (basis point – a basis point is 1/100 of a %) spread bet..
Stock R has a beta of 1.3, Stock S has a beta of 0.8, the expected rate of return on an average stock is 13%, and the risk-free rate of return is 7%. By how much does the required return on the riskier stock exceed the required return on the less ris..
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