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kap26 [50]
4 years ago
7

Rankin Corp. common stock is priced at $74.20 per share. The company just paid its $1.10 quarterly dividend. Interest rates are

6.0%. A $70.00 strike European call, maturing in 6 months, sells for $6.50. How much arbitrage profit/loss is made by shorting the European call, which is priced at $2.50?
Business
1 answer:
Luda [366]4 years ago
7 0

Answer:

The answer is $0.12 gain

Explanation:

We will be obtaining the no-arbitrage premium of the corresponding put as dictated by put-call parity, as follows: V P (0, K = 70, T = 0.5) = V C (K = 70, T = 0.5) + e rt K S(0) + P V 0,T (Dividends)

= 6.50 + exponential (0.03 70 74.20) + e (0.06 0.25 1.10) + e (0.06 0.5 1.10)

= 67.70 + 0.97 70 + 0.98 1.10 + 0.97 1.10

= 67.70 + 68.97 + 1.08 = 2.38.

Since we have decided to short the call at a premium higher by $0.12, the answer is $0.12 gain.

Thank you.

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Interest rates on 3-year Treasury securities are currently 1.92%, while 10-year Treasury securities yield 5.62%. If the pure exp
FromTheMoon [43]

Answer: 7.24%

Explanation:

From the question, we are told that:

3 years treasury securities have an interest rate = 1.92%

10 years treasury security has an interest rate = 5.62%

Let the 7 year treasury security interest in 3 years be represented by z.

Based on the expectation theory

( 1+1.92%)^3 × (1 + z%)^7 = (1 + 5.62%)^10

(1+0.0192)^3 × (1 + z%)^7 = (1 + 0.0562)^10

(1.0192)^3 (1 + z%)^7 = (1.0562)^10

1.05871(1 + z%)^7 = 1.72767

Divide both side by 1.05871

(1 + z%)^7 = 1.72767/1.05871

(1 + z%)^7= 1.6319

1 + z% = 1.6319^1/7

1 + z% = 1.6319^0.1429

1 + z% = 1.0724

z% = 1.0724 - 1

z% = 0.0724

We then convert the decimal to percentage

z = 7.24%

The market believes that 7-year Treasury securities will be yielding 7.24% in 3 years .

3 0
3 years ago
The best test of whether potential entry is a strong or weak competitive force is Select one: a. to ask if the industry's growth
timofeeve [1]

Answer:

The correct answer is letter "A": to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates.

Explanation:

The worldwide economy has allowed firms to expand their operations benefiting them by exploring new markets and increasing their number of customers, thus, generating more revenue. Before the firm decides to go ahead with the venture, <em>a market analysis must be performed to determine if the industry in the target country is growing and facilitates the operation of the business to ensure profits.</em>

8 0
3 years ago
According to the book Positive Leadership, leaders who want to create a positive work environment should attend to four areas: _
Luden [163]

According to the book positive leadership, leaders who want to create a positive work environment should attend to four areas of Social connection, open communication, a culture of empathy, and a willingness to help.

<h3>Which four factors are needed for creating positive work environment?</h3>

First one is social connection, which can be established by encouraging collaboration and communication among the employee. Second one is open communication, through which all parties are able to express ideas to one another.

Third is empathy- by showing the ability to understand and share the feelings of another and the last one is willingness to help, that means prioritize the employees and their problems by providing a solution.

Positive work experience is the ambience which consists safety, cooperation, trust, loyalty, equity etc.

Learn more about the positive work environment here:-

brainly.com/question/3197884

#SPJ1

3 0
2 years ago
Similarities between single column cash book and double column cash book<br><br>​
AlexFokin [52]

Answer:

The answer is "The both cash book is used to store transactions are recorded"

Explanation:

Single and Double column cash book:

  • A single column cash book is also known as a basic cash book, which is primarily used to record a business cash transactions (both debit and credit sides), it has only a single cash column titled "number" that is annually counted and balanced like that of a T-account.
  • A double columns cash book is also known as the two columns cash book, which is used to store both debit, credit, and discount sides, in which one for reporting money transfers and another for recording bank transactions.
8 0
3 years ago
Read 2 more answers
Assume your employer offers a bonus of $7200. The only catch is that you must wait 6 years to take possession of the money. If y
a_sh-v [17]

Answer:

The minimum would be the present value of the bonus, which is 5,075.72 dollars

Explanation:

we have to discount the 7,200 dollar bonus at 6% discount rate for 6 years to get the present value of the bonus:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  7,200

time  6 years

rate  6% = 6/100 = 0.06

\frac{7200}{(1 + 0.06)^{6} } = PV  

PV   $ 5,075.7159

5 0
3 years ago
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