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
kap26 [50]
3 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]3 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.

You might be interested in
On December​ 31st, Datton, Inc. has cost of goods sold of $ 550000​, ending inventory is $ 101000​, beginning inventory is $ 120
Gnoma [55]

Answer:

72 days

Explanation:

The computation of the accounts payable turnover ratio is shown below:

Accounts payable turnover ratio = Total Purchases ÷ Average Accounts payable

As we know that

Cost of goods sold =  Beginning inventory + total purchases - Ending inventory

i.e  

Total Purchases = Cost of goods sold + Ending Inventory – Beginning Inventory

= $550,000 + $101,000 - $120,000

= $531,000

So, the account payable turnover ratio is

= $531,000 ÷ $105,000

= 5.06 times

Now in days it is

= 365 days ÷ 5.06 times

= 72 days

5 0
3 years ago
Scenario: Home Monopolist) A monopolist faces a demand curve given by P = 60 2Q and has total costs given by TC = Q2. Its margin
enyata [817]

Answer:

2Q

Explanation:

Economy equilibrium is where MC = MR.

Marginal cost equals marginal return when the supply and demand is linear. Consumer surplus is the additional amount that a consumer is willing to pay for the goods and services. Here MC = 2Q and MR = 60 + 4Q. Here consumer is paying 2Q additional in the equation of marginal return.

6 0
3 years ago
On march 1, year 1, roland doe bought 200 shares of gummit stock at $40 per share. on april 1, year 2, roland sold short (sold w
laiz [17]

Answer:

1,000 long term capital gain

Explanation:

8 0
3 years ago
An ad for asian sensations newest product line of snack foods encourages its readers to "thai something new." the creatives who
maksim [4K]

The creatives who designed this ad intended its headline to be an attention-getting device. It is defined as having to show an opening statement in which the speaker uses that is to be engaged to the attention of the audience are likely to be capture after the component of the introduction that the speaker has given.

4 0
3 years ago
Market anomaly refers to _______.A. an exogenous shock to the market that is sharp but not persistentB. a price or volume event
Klio2033 [76]

Answer:

the correct answer is C. A trading or pricing structure that interferes with efficient buying and selling of securities.

Explanation:

7 0
3 years ago
Other questions:
  • Slapshot Company makes ice hockey sticks. During the month of June, 1,900 sticks were completed at a cost of goods manufactured
    5·1 answer
  • U.i designs is an all equity firm that has 40000 shares of stock outstanding. the company has decided to borrow $1 million to bu
    6·1 answer
  • A manufacturing firm is deciding whether or not to invest in a new printer that needs an initial investment of $150,000. The inv
    8·1 answer
  • The resources owned by firms that shut down in the process of creative destruction:
    6·1 answer
  • Atlantis Corporation has 10 comma 000 shares of 12 ​%, $ 84.00 par noncumulative preferred stock outstanding and 20 comma 000 sh
    9·1 answer
  • When changes to taxes and spending occur in the economy without explicit action by the central government, such policy is: 
A. C
    13·1 answer
  • A group of friends goes out to lunch and decides to split the bill. Their bill is $32. 50, plus they want to leave a 20% tip. Th
    11·1 answer
  • Micah is a scientist for a chemical company that makes bio-cleaners. What might be a task that Micah performs as part of his job
    12·2 answers
  • A postaudit is a valuable process because blank______. multiple choice question. it forces companies to fire employees who made
    13·1 answer
  • The question of how a tax change might impact U.S. economic output is most closely associated with the study of
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!