You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 5.1 of the text.
Suppose the price of a put option on a share of the index fund with exercise price of $110 and time to expiration of 1 year is $12, and suppose the risk-free interest rate is 6% per year. You are contemplating investing $107.55 in a 1-year CD and simultaneously buying a call option on the stock market index fund with an exercise price of $110 and expiration of 1 year. What is the probability distribution of your dollar return at the end of the year
1 answer:
Answer:
Follows are the solution to this question:
Explanation:
The price of one share plus one choice for the index fund is $112. Its distribution of HPR probabilities on the portfolio is:
The chances of dollar return distributions on the CD plus call option can be defined in the attached file please find it:
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Answer:
Flexible budget variance for Sales Revenue = $3,960 Favorable
Explanation:
Provided budget is static budget, firstly for calculating flexible budget variance for Sales Revenue.
For this flexible budget is made of same level of quantity as of actual level.
therefore Flexible budget sales = 990 units @ $70 per unit price will be same as of static budget.
Therefore Variance = Standard Flexible Budgeted Sales - Actual Sales
Standard Flexible Budgeted Sales = 990 $70 = $69,300
Actual Sales Revenue = 990 $74 = $73,260
Since actual revenue is more than budgeted sales this is favorable.
Flexible Budget Variance for Sales Revenue = $69,300 - $73,260 = $3,960
Since actual revenue is more than budgeted revenue therefore this is a favorable variance.
Flexible budget variance for Sales Revenue = $3,960 Favorable
Answer:
Cost of goods sold as per average cost method = $92,458.5
Explanation:
As for the information provided as follows:
Opening Inventory 265 units @ $153 each = $40,545
Purchase 465 units @ $173 each = $80,445
Purchase 165 units @ $213 each = $35,145
Total data 895 units = $156,135
Average cost per unit = $156,135/895 = $174.45
In average cost method simple average is performed, whereas in weighted average weights are assigned.
Sale is of 530 units
Cost of goods sold as per average cost method = $174.45 530 = $92,458.5