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RideAnS [48]
3 years ago
8

Stock price is $150. You see an at-the-money call option trading at $15, and at-the-money put trading at $5. The options have th

e same expiration date. You decide to buy a straddle. What will be the breakeven points of the strategy, i.e., at what stock prices will your profit will be exactly zero?a. Two breakeven points, S* = 145 and S* = 165b. Two breakeven points, S* = 135 and S* = 155c. One breakeven point, S* = 150d. Two breakeven points, S* = 130 and S* = 170
Business
1 answer:
Bogdan [553]3 years ago
4 0

Answer:

D) Two break even points, S* = 130 and S* = 170

Explanation:

option a)

if the stock price is $145,

put option ⇒ you win $5 - $5 (option price) = no gain

call option ⇒ you lose $15 (option price)

WRONG ANSWER

option b)

if the stock price is $155,

put option ⇒ you lose $5 (option price)

call option ⇒ you win $5 - $15 (option price) = -$10 loss

WRONG ANSWER

option c)

if the stock price is $150,

put option ⇒ you lose $5 (option price)

call option ⇒ you lose $15 (option price)

WRONG ANSWER

option d)

if the stock price is $170,

put option ⇒ you lose $5 = -$5 loss

call option ⇒ you win $20 - $15 (option price) = $5 gain

total gain/loss = $0

if the stock price is $130,

put option ⇒ you win $20 - $5 (option price) = $15 gain

call option ⇒ you lose $15 (option price)

total gain/loss = $0

CORRECT ANSWER

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tensa zangetsu [6.8K]

Answer: (D) Fairness and honesty

Explanation:

 The fairness and the honesty are the two main business ethics that helps in providing the various types of attributes such as integrity and the honesty with the customers regarding the products and the services.

These are the moral standard that helps in the decision making process by reducing the discrimination, mis-representation and also the coercion.

According to the given question, the business people are not providing any harm to the client, customers and also the competitors, this is the practicing of fairness and the honesty concept.

 Therefore, Option (D) is correct answer.

7 0
2 years ago
Who here thinks that we should create a medium of this not unsimilar to yahoo answers, in which we could as general questions in
ANTONII [103]
Well, in my opinion, there should be a little category for that, but then again, that may require extra moderation. Also, the guide lines say to never include personal information. Everyday issues often include personal info. Mostly all of the everyday issues we have can call under the line of math, science, reading, language arts, music, so on.
4 0
2 years ago
Khalid is a 39-year-old, married business owner who runs a dry cleaning service with three locations. His personal obligations a
madam [21]

Answer:

D. A limited liability company because he will only be liable for what he has invested in the business. His personal assets will be protected, and he can be taxed like a sole proprietorship.

3 0
3 years ago
An organization of investors usually in the form of a limited partnership who have joined together for the purpose of pooling ca
Nutka1998 [239]

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6 0
1 year ago
Tommy bought 35 shares of stock at $45.75 per share. He received dividends of $82.45 during the year. At the end of the year, hi
gogolik [260]

Answer:

10.57%

Explanation:

Return on investment is a profitability measure of gains realized from an investment. It is a ratio that shows how a business uses its resources to generate profits. Return on investment compares the net income against the initial investment.

ROI = Net Income / Cost of Investment

For Tommy,

The initial investment is 35 x $45.75 =$1,601.25

The gains from the investments

Dividends of $82.45

Gains in share value = 35 x ($48. 75 -$45.43)

35 x 2.48 =$86.8

Net gains will be $82.45 + $86.8= $169.25

ROI = $169.25/$1601.25

ROI =0.10569  X 100

=10.57%

5 0
3 years ago
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