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GarryVolchara [31]
3 years ago
15

The common stock of the Avalon Corporation has been trading in a narrow range around $40 per share for months, and you believe i

t is going to stay in that range for the next three months. The price of a three-month put option with an exercise price of $40 is $3, and a call with the same expiration date and exercise price sells for $4. Selling a straddle would generate total premium income of _____. $300 $400 $500 $700
Business
2 answers:
solniwko [45]3 years ago
5 0

Answer:

$700

Explanation:

Selling a straddle means that you are going to both sell a call option and a put option. Since you expect that the price of Avalon's stock remains around $40, then if you sell either a call or put option, at $40, you will not lose money if the other trader decides to execute their option.

Each call option is priced as $3 per share = $3 x 100 shares = $300

<u>Each put option is priced as $4 per share = $4 x 100 shares = $400  </u>

                                                                                    total gain = $700

So if everything goes as planned, you should be able to earn $700. If the price of the shares changes, then you earnings will be a little lower.

Sergeu [11.5K]3 years ago
4 0

Answer:

$700

Explanation:

Given that

Price of a 3 month put option = $3

Price of a 3 month call option = $4

Considering the above

Selling the straddle = sell a put + sell a call

Thus,

Total premium income from selling a stradle = (P + C)100

Where,

P is price of put

C is price of call

Therefore,

Total premium from selling a stradle

= (3 + 4)100

= 7 × 100

= $700

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The graph represents the supply and demand curve for chocolates in the economy. Identify the price and quantity at which there w
Zielflug [23.3K]

Answer:

Equilibrium Price - 3

Equilibrium Quantity - 3

Explanation:

The price at which there will be equilibrium in the chocolate market is 3 units while the corresponding quantity is also 3 units.

<u>The equilibrium price and quantity represents the price and quantity where the demand for a product is equal to the supply for the same product respectively.</u>

<em>In the graph, the point of intersection of the demand and the supply curve represents the equilibrium point. At this point, the price on the Y axis is 3 units while the corresponding quantity on the X axis is also 3 units.</em>

3 0
2 years ago
Sylvia's annual salary increases from $102,300 to $109,500. Sylvia decides to increase the number of vacations she takes from th
Vinvika [58]

Answer:

4.20 and normal good

Explanation:

The computation of the income elasticity of demand is shown below:

= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in income ÷ average of quantity income)  

where,  

Change in income would be

= Q2 - Q1

= 109,500 - 102,300

= 7,200

And, average of income would be

= (109,500 + 102,300) ÷ 2

= 105,900

Change in quantity demanded would be

= 4 - 3

= 1

And, average of quantity demanded would be

= ($4 + 3) ÷ 2

= 3.5

So, after solving this, the income elasticity of demand is 4.20

Since the elasticity comes in positive which means the good is a normal goods

7 0
3 years ago
Barrington Bears has developed the following sales forecasts for the next few months. January 500, February 600, March 720, Apri
Oduvanchick [21]

Answer:

The correct answer is C.

Explanation:

Giving the following information:

Barrington Bears has developed the following sales forecasts for January 500 units.

BB has 80 bears on hand on Dec. 31. The normal ending inventory policy is to hold 20% of next month’s sales.

Direct labor is paid $18 per hour. Each bear takes 40 minutes to hand-finish. Variable overheads total $21 per direct labor hour. Fixed overheads amount to $25,000 per month.

First, we need to calculate the production for January.

Sales= 500 units

Ending inventory= (600*0.2)= 120 units

Beginning inventory= 80 (-)

Total= 540 units

Conversion costs= direct labor + manufacturing overhead

Direct labor= [(40/60)*540]*$18= $6,480

Variable overhead= 21*360 hours= $7,560

Fixed overhead= $25,000

Total conversion costs= $39,040

5 0
3 years ago
PLEASE ANSWER<br> If The Fed reduces interest rates will banks make more loans or fewer loans?
dybincka [34]
More loans because with lower interest rates the people pulling out the loans will have to pay the bank less money for bigger loans.
7 0
3 years ago
Q 10.7: Melbee Farms is considering purchasing a new combine that would help them finish their harvesting faster, thus allowing
LUCKY_DIMON [66]

Answer:

Discounted payback period= 3 years 1 month

Explanation:

The discounted payback period is the estimated length of time in years it takes the present value of net cash inflow from a project to equate the net cash the initial cost  

To work out the discounted payback period, we will compute present value of the cash inflow and then determine how long it will take for the sum to be equal to the initial cost. This is done as follows:

Year     Cash flow     DF        Present value  

0           487,000 × 1          = (487,000)

1          157,000 × 1.07^(-1) = 146,729.0

2         182,000 × 1.07^(-2) = 158965.8

  3         202,000 × 1.07^(-3) = 164,892.2

4         213,000  × 1.07^(-4) =162,496.7

Total PV for 2 years = 146729 +158965+164892= 470587.0

Balance of cash flow remaining to equal  =  487,000-470587 = 16413.0

 Discounted payback period = 3 years + 16413.0 /162,496.7 × 12 months

= 3year , 1.2months

Discounted payback period= 3 years 1 month

5 0
3 years ago
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