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damaskus [11]
3 years ago
6

Options can also be used for hedging. Consider an investor who in May of a particular year owns 1,000 Microsoft shares. The shar

e price is $28 per share. The investor is concerned about a possible share price decline in the next two months and wants protection. The investor could buy 10 July put option contracts on Microsoft on the CBOE with a strike price of $27.50. This would give the investor the right to sell a total of 1,000 shares for a price of $27.50 each. If the quoted option price per share is $1, what is the total cost of the hedging
Business
1 answer:
Sunny_sXe [5.5K]3 years ago
8 0

Answer:

The total cost of hedging is $1,000

Explanation:

The Investor in may owns 1000 Microsoft shares which is currently selling for $28  per shares and he is on the opinion that the price will crash in next two months so need to be protected from the crash

So he should buy put option which gives him right to sell at strike price ($27.5) what ever the price may be . So for buying the right to sell, he need to pay premium the option writer

Given premium per share is 1, We have 1000 shares, so we need hedge for 1000 shares .

Cost of hedging = No of option contracts bought * Premium per option

Cost of hedging = 1000 * $1

Cost of hedging = $1000

Thus, the total cost of hedging is $1,000.

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eimsori [14]
It helps an organization because that is their rules and regulations and standards that employers have to follow. An example of how the manual can help an organization is if you purchase something and the policy says you have 30 days to return it and you return it 31 days later they will not be able to take it because that is one of their rules. 
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3 years ago
The following merchandise transactions occurred during December for two different companies: Rippen
kondaur [170]

The accounting entries for Rippen Corporation is recorded as follows:

December 3,

DR Accounts Receivable (Burnen Corp.) $480,000

CR Sales $480,000

DR Cost of Goods Sold $320,000
CR Inventory $320,000

December 8,

DR Sales Return $30,000

CR Accounts Receivable $30,000

DR Inventory $20,000

CR Cost of Goods Sold $20,000

December 12,

DR Cash $441,000

DR Credit Discount $9,000

CR Accounts Receivable $450,000

<h3>What is Journal Entry?</h3>

A journal entry is recorded for the transactions of a company in the relevant period, the entry that is recorded is also known as the double entry. These journal entries are then used to prepare T-Accounts, an then trial balance is made and ultimately income statement and balance sheet are made.

The transaction includes a discount of 2% as credit discount for the payment being made within 10 days.

Learn more about Journal Entries at brainly.com/question/27076717

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5 0
1 year ago
Steven consumes only two goods, both of which are normal goods. He is currently maximizing his utility in consumption of both go
zzz [600]

Answer:

The answer is: remain the same

Explanation:

The marginal utility of a good or service is how much better we feel when consuming an extra unit of that good or service. For example if we are very thirsty, the marginal utility of consuming a can of Coke is very large, but once our thirst is quenched, an extra can of Coke will not provide use with that much satisfaction as before.

If the price of a substitute good increases, the marginal utility of the good whose price didn't change, will remain the same.

Let's go back to the Coke example. An extra can of Coke will give me 5 more satisfaction units (I'm assuming I can measure satisfaction) and an extra slice of pizza will give me 7 more units of satisfaction. If the price of Coke increases from 50 cents to $1, its marginal utility will decrease. I will buy more pizza because the satisfaction I get from drinking Coke is now smaller.

4 0
3 years ago
Yuto owns a souvenir shop in Tokyo. He wants to reach English speaking tourists in his city during certain hours of the day. Whi
vesna_86 [32]

Answer:

Location targeting

Ad scheduling

Language targeting

Explanation:

Yuto try three new and improve methods, Location targeting , Ad scheduling ,Language targeting to reach English speaking tourists.

By using these techniques, Yuto focus on specific target and specific location for target his tourist .

7 0
3 years ago
Radovilsky Manufacturing Company , in Hayward, California, makes flashing lights for toys. The company operates its production f
IRISSAK [1]

Answer:

Explanation:

Given Demand D = 12,500 lights per year

Set up cost S = $51

Cost of each light (C) = $1 .05

Holding cost = $0.1 per light per year

Production p= 100 lights per day

Usage (d) = 12,500/300 days = 41.66(round up to 42)

= 42 lights per day

a) What is the optimal sizeof the production run?

Q =√{(2×D×S) / (H(1-(d / p)))}

Q =√{(2×12500×51)/(0.1(1-(42/100)))}

= 4688.577 = 4689 units

Q = 4689 units

b) What is the average holding cost per year?

Average holding cost per year = average inventory level * H

= (Q/2)H[1- (d/p)]

= (4689/2)0.1[1-(42/100)]

= $135.98

c) What is the average setup cost per year?

average setup cost per year = (D/Q)S

= (12,500/4689)× 51

= 135.97

d) What is the total cost per year, including the cost of the lights?

Total cost = D*C + total set up cost + total holding cost

12,500 ×1.05 + 135.98 + 135.97

Total cost = $ 13,396.95

6 0
3 years ago
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