Answer:
Buy 0.8 shares for each option purchased
Explanation:
Calculation to determine What is necessary to hedge the position
Using this formula
N=Vu-Vd/U-D
U = stock price in case of an up move = $36
D = stock price in case of an down move = $26
VU = put option value if stock goes up = $0
VU = put option value if stock goes down = $32 - $26 = $6
Using this formula
N=
−
V
U
−
V
D
U
−
D
N
=
−
0
−
6
36
−
26
N
Now let calculate What is necessary to hedge the position
Value =74 x + 6
Hence,
90x=74x + 6,
x=6/(90-74)
x=6/16
x=.375
Answer
The answer and procedures of the exercise are attached in the following archives.
Explanation
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
Answer:
If the units are reworked, income will increase by $5,800.
Explanation:
Giving the following information:
Number of units= 1,000
Sell as-is= $4.3
Rework cost= $2.8
Selling price= $12.9
<u>Because the original cost will remain constant in both options, we will not take them into account.</u>
Sell as-is:
Effect on income= 1,000*4.3= $4,300
Rework:
Effect on income= 1,000*(12.9 - 2.8)
Effect on income= $10,100
If the units are reworked, income will increase by $5,800.
Answer:
D. countries should specialize in the production of goods for which they use fewer resources in production than their trading partners.
Explanation:
