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jeka57 [31]
3 years ago
15

A trader creates a long butterfly spread from options with strike prices $60, $65, and $70 by trading a total of 400 options. Th

e options are worth $11, $14, and $18. What is the maximum net loss (after the cost of the options is taken into account)?
Business
1 answer:
Rufina [12.5K]3 years ago
6 0

Answer:

The amount of maximum net loss is $100

Explanation:

The butterfly spread comprise of buying 100 options with the strike price of $60 and $70 and the selling 200 options with the strike price of $65.

The maximum loss is when the strike price is less than $60 or be greater than $70. The aggregate payoffs from the options will amount to $0.

The cost of setting up the butterfly spread is:

= 11 × 100 + 18  × 100 - 14  × 200

= $100

Therefore,the net loss will be $100

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Oligopoly a market structure in which a few late firms dominate a market.
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3 years ago
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How long will it take for a $4000 investment to grow to $6000 at an annual rate of 15%, compounded monthly? Assume that no withd
Inessa05 [86]

Answer:

It will take 2.72 years and 32.64 months.

Explanation:

Future value is the sum of principal amount and compounded interest amount invested on a specific rate for a specific period of time.

Use following formula to calculate the time period.

FV = PV x ( 1+ r )^n

FV = Future value = $6,000

PV = Present Value =  $4,000

r = rate of interest = 15% yearly = 15% / 12 = 1.25%

n = time period = ?

$6,000 = $4,000 x ( 1 + 1.25% )^n

$6,000 = $4,000 x ( 1.0125 )^n

$6,000 / $4,000 = ( 1.0125 )^n

1.5 = ( 1.0125 )^n

Log 1.5 = n log 1.0125

n = Log 1.5 / log 1.0125

n = 32.64 months

n = 2.72 years

6 0
3 years ago
You are analyzing the cost of capital for a firm that is financed with 65 percent equity and 35 percent debt. The cost of debt c
ExtremeBDS [4]

Answer:

c. 15.8%

Explanation:

The cost of equity is the WACC (weighted average cost of equity)

WACC formula = wE*rE + wD*rD(1-tax) , whereby

wE = weight of equity = 65%

rE = cost of equity = 20%

wD = weight of debt=35%

rD(1-tax ) = after tax cost of debt =8%

WACC = (0.65 *0.20) + (0.35*0.08)

= 0.13 + 0.028

= 0.158 or 15.8%

Therefore, the overall cost of capital is 15.8%

8 0
4 years ago
An increase in household saving causes consumption to a. fall and aggregate demand to increase. b. rise and aggregate demand to
skad [1K]

Answer: d. fall and aggregate demand to decrease.

Explanation: When household savings increase, the consumption will fall, as the money which should be spent on consumption such as food, clothing and other products will reduce in other to foster household saving. Also, aggregate demand which is used to measure the total amount of demand for goods and services produced in an economy will also decrease as increase in aggregate demand will inadvertently lead to decrease in household saving.

Therefore, increase in savings requires reduction in spending and demand for products.

8 0
3 years ago
​Drive-Ins borrowed money by issuing $ 2 comma 500 comma 000 of 8 % bonds payable at 96.5. Interest is paid semiannually. Requir
Bogdan [553]

Answer:

I don't think he got any back

Explanation:

The money could have been a tip.

4 0
3 years ago
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