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Ludmilka [50]
3 years ago
5

The ABC Company expects stock prices to decrease. The current stock price is $96. The company purchases a put option, with exerc

ise price of $93 and a premium of $3 per share. Just before the expiration, stock price rises to $91. Should the investor exercise the put option or not? What will the total payoff per share be?
Business
1 answer:
Talja [164]3 years ago
6 0

Answer:

Payoff = $2 per share.

Explanation:

In a put option, the long (the party that buy the put) will have gain on the option when the underlying asset price is lower than the excercise price of that asset <em>(imagine the advantage that you can sell a chicken at $12 when it market price of is is only 10)</em>.

Because the stock price is $91, lower than exercise price of 93, so the company should exercise the put. Total payoff per share is 93 - 91 = $2.

<em>Note: We dont include premium to buy the put here because the question asking about payoff. We on include premium in calculations when the question is about profit.</em>

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An financial surprise refers to any extrude to fundamental macroeconomic variables or relationships that has a considerable impact on macroeconomic effects and measures of financial performance, which includes unemployment, consumption, and inflation. Shocks are regularly unpredictable and are generally the end result of occasions concept to be past the scope of regular financial transactions. Economic shocks have full-size and lasting outcomes at the financial system, and, in accordance to actual commercial enterprise cycle theory (RBC), are concept to be the foundation purpose of recessions and financial cycles. Economic shocks are random, unpredictable occasions which have a full-size effect at the financial system and are due to matters outdoor the scope of financial models.

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1 year ago
Which of the following is described as an event that a company hosts to thank its loyal​ customers?
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<h2>Answer:</h2><h2>Option C: Brandfest</h2><h2>Brandfest is described as an event that a company hosts to than its loyal customers.</h2>

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Brandfest is the most important way to thank its loyal customer and bring more business by sustaining the brand name.

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7 0
3 years ago
Suppose NoGro, Inc. has just issued a dividend of $2.90 per share. Subsequent dividends will remain at $2.90 indefinitely. Retur
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Value of one share will be $19.33

Explanation:

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Value of one share will be equal to ratio of dividend per year to the required rate of return

So value of one share =\frac{2.90}{0.15}=19.13

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after 9 years:

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