1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
maxonik [38]
11 months ago
11

the market price of northern mills stock has been relatively volatile and you think this volatility will continue for a couple m

ore months. thus, you decide to purchase a two-month european call option contract on this stock with a strike price of $42 and an option price of $2.60. you also purchase a two-month european put option contract on the stock with a strike price of $42 and an option price of $1.20. what will be your net profit or loss on these option positions if the stock price is $47 on the day the options expire? ignore trading costs and taxes.
Business
1 answer:
taurus [48]11 months ago
5 0

The  answer is $120.

Explanation: The computation of the net profit or loss is shown below: Before that we have to determine the following calculations

Net Profit from call option is = (Gain from Exercising Call Option - Option Premium paid) × Size of the Contract

= (($47 - $42) - $2.60) × 100 Shares

= $240

Net Loss from put option is

= (Option Premium paid) × Size of the Contract

= $1.20 × 100 Share

= $120

So, the net profit is  = Net Profit from Call Option - Net loss from Put Option= $240 - $120

= $120

To learn more about  net profit, click here.

brainly.com/question/22024991

#SPJ4

You might be interested in
Clarion corp. invested cash in a 6-month certificate of deposit (cd) on november 1, 2015. if clarion corp. has an accounting per
melisa1 [442]
<span>Clarion should expect to recognize interest revenue on their CD both on December 31st 2015 and May 1st 2016. They will receive it in December thanks to end of your returns and then it will pay out its full amount 6 months from the purchase date which is on May 1st of 2016.</span>
7 0
3 years ago
Two firms, A and B, both produce widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable
Dmitry_Shevchenko [17]

Answer:

A) 11

Explanation:

The degree of operating leverage measures change in earning before interest and tax (EBIT) to change in sales.

Solution:

Formula

DOL = Percentage change in EBIT / Percentage change in sales

Percentage Change in EBIT = EBIT(1) / EBIT(2) - 1

Percentage Change in Sales = Sales(1) / Sales(2) - 1

<em>Strong economic Condition</em>

Sales = $1 Price x 1,200,000 units = $1,200,000

Variable Cost (VC) = $0.5 variable cost x 1,200,000 units = $600,000

Fixed cost (FC) = $500,000

EBIT = Sales - VC - FC

EBIT = $1,200,000 - $600,000 - $500,000

EBIT = $100,000

<em>Weak economic Condition</em>

Sales = $1 Price x 1,100,000 units = $1,100,000

Variable Cost (VC) = $0.5 variable cost x 1,100,000 units = $550,000

Fixed cost (FC) = $500,000

EBIT = Sales - VC - FC

EBIT = $1,100,000 - $550,000 - $500,000

EBIT = $50,000

Solving for DOL:

Percentage Change in EBIT = $100,000/50,000 - 1

Percentage Change in EBIT = 100%

Percentage Change in Sales = $1,200,000/1,100,000 - 1

Percentage Change in Sales = 9.09%

Now, using the above mentioned formula we can calculate DOL:

DOL = 100% / 9.09% - 1 = 11x

4 0
2 years ago
Complete the missing word in the sentence below to progress!
iren2701 [21]

for a business to be viable,it must make a good or proper sales

7 0
2 years ago
Read 2 more answers
You purchased a stock for $29.40 a share, received a dividend of $0.72 per share, and sold the stock after one year for $31.30 a
Ludmilka [50]

Answer:

2.45%

Explanation:

dividend yield = annual dividend / Stock Price per share

$0.72 / $ 29.40 = 0.0245     (2.45%)

6 0
3 years ago
In times of rising prices accounting on the basis of the historical cost
NikAS [45]
Understate profit and inflate assets
3 0
2 years ago
Other questions:
  • Dab Corporation was organized on January 1, Year 1. During Year 1, Dab had the following transactions relating to shareholders'
    15·1 answer
  • Which of the following statements is CORRECT?
    9·1 answer
  • Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its common stock
    8·2 answers
  • If Ben &amp; Jerry’s sold more units of its Bonnaroo Buzz Fair Trade-sourced super premium ice cream to U.S. consumers as a resu
    13·1 answer
  • Which of the following makes a true statement? Concurrent powers are those that are exclusive to the states, such as ratifying a
    13·1 answer
  • Which of the following best illustrates the spirit of stewardship? Lobbying government officials to increase the drilling for of
    12·2 answers
  • The maximum production of an oil refinery is 1400 barrels per day. The refinery can produce two types of fuel: gasoline and heat
    12·1 answer
  • Smokecity, Inc., manufactures barbeque smokers. Based on past experience, smoke city has found that it’s total annual overhead c
    9·1 answer
  • Mark is facing a crucial deadline. The work is more than he can handle in the amount of time, but he has not told his manager. H
    7·1 answer
  • On January 1 of this year, Trucks R Us Corporation issued bonds with a face value of $ 2,000,000 and a coupon rate of 10 percent
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!