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salantis [7]
3 years ago
10

Assume the spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. What is the minimum price that a six-month Ame

rican call option with a strik-ing price of $0.6800 should sell for in a rational market
Business
1 answer:
Rama09 [41]3 years ago
4 0

Answer:

2 cents

Explanation:

The spot price = $0.7000 = 70 cents, The forward rate = $0.6950 = 69.5 cents and the call option with striking price = $0.6800 = 68.00 cents

The annualized six month rate = 3 1/2 % = 3.5 %, therefore the rate = r/n, where n is the number of period per year = 2. Therefore r/n = 3.5% / 2 = 0.035 / 2 = 0.0175

The minimum price = Maximum (spot price - striking price, (forward rate - striking price) / (1 + 0.0175), 0) = Maximum(70 - 68, (69.5 - 68)/ 0.0175, 0)

Minimum price = Maximum (2 , 1.47, 0) = 2 cents

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Answer

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5 0
3 years ago
Vaughn Manufacturing can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution
Annette [7]

Answer:

Vaughn should produce Plain as it makes greater profit.

Explanation:

Vaughn Manufacturing can sell all the units it can produce of either Plain or Fancy but not both.

Plain has a unit contribution margin of $86 and takes two machine hours to make and Fancy has a unit contribution margin of $111 and takes three machine hours to make.

There are 2400 machine hours available to manufacture a product.

Profit per machine hour for Plain

= \frac{86}{2}

= $43

Profit per machine hour for Fancy

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Plain makes $6 more profit per machine hour than Fancy.

7 0
3 years ago
Based on the following information, what is the balance on the financial account? Exports of goods and services = $5 billion Imp
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Answer:

3 billion

Explanation:

the financial account will be the cash inflow less the cash outflow:

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4 billion of dollar enter the US from aboard while 1 billion left the country with destination aboard in total the financial account will be:

4 billion - 1 billion = 3 billion

4 0
4 years ago
A corporation is authorized to sell 1,000,000 shares of common stock. Today there are 500,000 shares outstanding, and the board
Juliette [100K]

Answer:

35,000 stocks

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Whether shareholders receive money or stocks, they still have to include the dividends as part of their gross income.

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3 years ago
Please help or going to jump off a really high bridge
Sedbober [7]

Answer:

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Explanation:

7 0
3 years ago
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