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alina1380 [7]
3 years ago
9

Assume that a speculator purchases a put option on British pounds (with a strike price of $1.50) for $.05 per unit. A pound opti

on represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1.51 and continually rises to $1.62 by the expiration date. The highest net profit possible for the speculator based on the information above is:
Business
1 answer:
scoray [572]3 years ago
7 0

Answer:

The highest net loss of $1,562.50 (i.e. – $1,562.50)

Explanation:

This can be calculated using the following equation:

Highest net profit possible = British pounds put option price per unit × Units of the pound option

                                                = $0.05 x 31,250

Highest net profit possible = $1,562.50

However, based on the information provided in the question, the option will not be exercised and this will result into the highest net loss of $1,562.50 (i.e. – $1,562.50).

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Which one of the following best describes the term "efficient market"?A) The commissions on large transactions are smaller than
Aleonysh [2.5K]

Answer: Option B

Explanation: In simple words, the market in which the price of the securities reflect all the information that is relevant to the the investor is called an efficient market. No investor can beat such markets as no security is undervalued or overvalued.

This accuracy in pricing could only be maintained when all the participants are fully aware of new information which is possible only if the information is quickly spread in the market.

Hence the correct option is B.

3 0
4 years ago
a. Compute the expected rate of return for Acer common​ stock, which has a 1.5 beta. The​ risk-free rate is 4.5 percent and the
ira [324]

Answer:

(a) 12.75%

Explanation:

Given that,

Beta = 1.5

Risk-free rate = 4.5 percent

Expected return on market portfolio = 10 percent

Here, we are using CAPM:

(a) Expected rate of return for Acer common​ stock:

= Risk free rate + beta (Expected return on market Portfolio - Risk free rate)

= 4.5% + [1.5 (10% - 4.5%)]

= 0.045 + (1.5 × 0.055)

= 0.045 + 0.0825

= 0.1275 or 12.75%

(b) This rate is known as the fair rate which compensates the holder or investor for assuming the risk associated with it and for the time value of money.

8 0
3 years ago
Suppose that the standard deviation of quarterly changes in the prices of a commodity is $0.65, the standard deviation of quarte
Mice21 [21]

Answer:

The size of the futures position should be 64.2% of the size of the company’s exposure in a three-month hedge.

Explanation:

As given,

The standard deviation of quarterly changes in the prices of a commodity = $0.65

The standard deviation of quarterly changes in a futures price on the commodity =  $0.81

The coefficient of correlation between the two changes = 0.8

Now,

Optimal hedge ratio = 0.8×\frac{0.645}{0.81} = 0.8×0.80 = 0.6419

⇒Optimal hedge = 0.6419 ≈ 0.642 = 64.2 %

⇒The size of the futures position should be 64.2% of the size of the       company’s exposure in a three-month hedge.

5 0
3 years ago
Which of the following is an example of a capital resource
Sever21 [200]
<span>You didn't provide examples, but since capital resources are resources made so as to have them make other things, you could say that capital resources are things like machinery for building things, or machinery created in order to create food, or basically anything whose purpose is to make other things. Most basic things that belong to that domain are tools like a hammer or a screwdriver.</span>
4 0
4 years ago
Which of the following would be considered a cash inflow in the financing activities section of the statement of cash flows?
SIZIF [17.4K]

Answer:

1.Issuing bonds payable.

The company receive cash through third parties financial capital

Explanation:

financing activities

cash disbursement or cash proceeds from afinancing activities surch as:

loan, bonds, issuance of stock, treasury stock, notes, other.

4.Collection of a loan made to another company.

The company invest his cash in giving a loan to gain interest, it wasn't a financial decision to increase cash, it was an investment to generate cash.

2.Receiving cash from customers.  it would be operating activites. It is a source of cash from the main activity.

3.Sale of equipment.  It would be investing

7 0
3 years ago
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