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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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Answer:

e. none of the choices.

Explanation:

Based on the scenario being described within the question it can be said that  none of the choices are correct because this method focuses on obtaining an order quantity by fixing the quantity for a certain period of time, and calculating the total quantity of Net Requirements within the period. Therefore since the first week and week 4 are missing then none of these are correct, and since the information is not provided by choice answer d. is wrong too.

3 0
3 years ago
What refers to analysis of environmental impacts of products from the design stage through​ end-of-life?
statuscvo [17]

Answer:

Life cycle assessment

Explanation:

Life cycle assessment is a technique that is used to analyse the environmental impacts of products from the design stage through end life. This assessment technique helps to examine the environmental impacts of products throughout their lives. It consists of 5 stages of material extraction, manufacturing, packaging and transportation, use and end of life. This analysis is carefully designed to effectively estimate the environmental impacts.

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The reduction of on the job injuries and illnesses would benefit employers, because they would
marusya05 [52]
B is the correct answer.
8 0
3 years ago
Suppose the production function in an economy is Y = K0.5L0.5, where K is the amount of capital and L is the amount of labor. Th
maw [93]

Answer:

Therefore new level of output = (64x0.5)*(64.0.5) = 1,024

Explanation:

Suppose the production function in an economy is Y = K0.5L0.5,

where K is the amount of capital and

L is the amount of labor.

The economy begins with 64 units of capital and 16 units of labor.

If a sudden immigration quadruples the size of the population, while the capital stock is unchanged, what is the new level of output?

K remains 64 and L= 16 x 4 = 64

Therefore new level of output = (64x0.5)*(64.0.5) = 1,024

What is the new wage and rental price of capital?

The rental price for capital is expected to remain unchanged because there is no change in the quantity of capital But the wage level is expected to drop because of excess supply due to the immigration boom.

What share of output does labor receive now?

The function remains unchanged in proportion which is 0.5 but in absolute figures it will receive 0.5*1,024 = 512

5 0
3 years ago
Gamma Company adjusts its accounts at the end of each month. The following information has been assembled in order to prepare th
Tresset [83]

Answer; c. $14,000

Explanation

On December 1, rent had been paid for 3 months. At a rate of $7,000 a month this will come to;

= 7,000 * 3

= $21,000

The Prepaid rent account will reduce every month by the rent due for that month. The balance on the Prepaid account as at December 31 will therefore have reduced by one month from December 1.

= 21,000 - 7,000

= $14,000

7 0
3 years ago
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