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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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Ballard Company incurred a total cost of $8,500 to produce 400 units of pulp. Each unit of pulp required six (6) direct labor ho
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$4,900

Explanation:

Given that,

Total cost at a production level of 400 units = $8,500

Each unit of pulp requires = 6 direct labor hours

Variable cost = $1.50 per direct labor hour

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= Cost per direct labor hour × Direct labor hours required for each unit × No. of units produced

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= $3,600

Total cost is sum total of total fixed cost and total variable cost.

Total cost = Total fixed cost + Total variable cost

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$8,500 - $3,600 = Total fixed cost

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Roosevelt launched the second new deal because of the failure of his initial policies to pull the country out of the depression
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The second deal focused on social welfare to ease the problem brought by the great depression. The goals were: social securities for retirement, employment for those who are unemployed; health services, housing for illegal settlers and improvement on national resources.
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2 years ago
Which is not a factor in determining the amount you should consume from each food group in the mypyramid plan?
Talja [164]

The correct answer is: Weight

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6 0
2 years ago
Read 2 more answers
9) A firm is selling two products, chairs and bar stools, each at $50 per unit. Chairs have a variable cost of $25, and bar stoo
Ksivusya [100]

Answer:

Ans.

a) BEP (units) =727; BEP($)= $36,350

b) BEP (units) =690; BEP($)=$34,500

Explanation:

Hi, in order to find the break even point in units, we have to use the following equation in both cases.

BEP(Units)=\frac{Fixed Costs}{(AveragePrice-Average VariableCost)}

Since the sales mix is different in both scenarios, let´s find the average variable cost for a) (notice that there is no need to find the average price because both, the stool and the chair have the same price)

AverageVariableCost=25*\frac{1}{2} +20*\frac{1}{2} =22.5

Now, the fraction aside each of the price is 1/2 in both cases, because the sale mix 1:1 means that the company makes 1 stool for every chair it makes, in fraction that is, for every 2 items that the company makes, 1 is a stool (1/2) and 1 is a chair (1/2).

So, our BEP in units is:

BEP(Units)=\frac{20,000}{(50-22.5)} =727

BEP(Dollars)=727*50=36,350

That means that the company has to make 727 units, which 363 are chairs and 364 are stools (you could say 364 chairs and 363 stools too, because we are heavily rouding numbers). This is represented in $36,350 in sales.

Now, for b), our average cost is:

AverageVariableCost=25*\frac{1}{5} +20*\frac{4}{5} =21

As you can see, the fraction changed, that is because of the new sales mix of 1:4, that is: the company makes 4 stool for every chair it makes, in fraction that is, for every 5 items that the company makes, 4 are a stools (4/5) and 1 is a chair (1/5).

Now, let´s find our new BEP in units and dollars.

BEP(Units)=\frac{20,000}{(50-21)} =690

BEP(Dollars)=690*50=34,500

That means that the company has to make 690 products, which 138 are chairs and 552 are stools. This is represented in $34,500 in sales.

Best of luck.

5 0
3 years ago
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