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olasank [31]
3 years ago
12

You own one call option with an exercise price of $30 on Nadia stock. This stock is currently selling for $27.80 a share but is

expected to increase to either $28 or $34 a share over the next year. The risk-free rate of return is 5 percent. What is the current per share value of your option if it expires in one year
Business
1 answer:
Shalnov [3]3 years ago
5 0

Answer: 0.755

Explanation:

From the information given, the current per share value of the option if it expires in one year will be calculated as follows:

Firstly, we calculate the present value which will be:

= $28 / ( 1 + 0.05 )

= $28/1.05

= $26.667

The number of options needed will be:

= ( 34 - 28 )/ ( 4-0)

= 6/4

= 1.5

Therefore,

27.80 = (1.5 x Co) + [28 / (1+0.05)]

27.80 = 1.5Co + (28/1.05)

27.80 = 1.5Co + 26.667

1.5Co = 28.0 - 26.667

1.5Co = 1.1333

Co = 0.755

Therefore, the answer is 0.755

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On March 13, a company writes off a customer's account of $3,500. On June 3, the customer unexpectedly pays the $3,500 balance.
Yuri [45]

Answer and Explanation:

The journal entries are shown below:

1. Allowance for doubtful Accounts Dr      $3,500

            To Accounts receivable         $3,500

(Being the allowance for doubtful account is recorded)

2. Accounts receivable Dr $3,500

           To Allowance for doubtful Accounts $3,500

(Being the written off amount is recorded)

3. Cash Dr $3,500

        To Account receivable $3,500

(Being the cash collection is recorded)

Only these 3 entries are required

5 0
3 years ago
In a financial sector, we use ______ to construct financial instruments such as derivatives.
Anettt [7]

Answer:

Predictive models

Explanation:

Predictive modeling uses statistics to predict outcomes. It can be applied to any type of unknown event, regardless of when it occurred.

3 0
3 years ago
Choose the correct choice; At the current price level, producers supply $375 billion of final goods and services while consumers
Solnce55 [7]

Answer:

The price level is A) Above equilibrium.

Explanation:

Normally, every economist believe that a lower price attracts a higher demand. This is so when the behaviour of consumers are measured when choosing a product.  Many consumers go for a low priced product or cheaper product over a high priced product or expensive product irrespective of quality, taste or satisfaction derived from consuming them.

Price relating to market or in terms of quantity demanded and quantity supplied is referred to as equilibrium price or equilibrium quantity. When the market price is below equilibrium, quantity supplied of a product will be less than the quantity demanded for it because the price of goods are cheaper. But when price is above equilibrium, quantity supplied will be greater than quantity demanded because the price of goods is high.

7 0
3 years ago
Imagine a hypothetical economy with a population of 100 people, 80 of which over sixteen. Forty eight of these people who are wo
Ainat [17]

Answer:

a) unemployment rate = 15

b) unemployment rate = 2.5

Explanation:

unemployed people are those who are willing and available to work and have actively been seeking a job in the past four weeks. This accurately describes the 12 people who are willing, able and looking for work but cannot find jobs. To calculate the unemployment rate in percentage, the following formula is used:

unemployment\ rate = \frac{number\ of\ unemployed}{labour\ force} \times 100\\

Where:

a) Number of unemployed = 12

Labour force = 80 (number of people over 16 years of age)

\therefore unemployment\ rate = \frac{12}{80} \times 100 = 0.15 \times 100 = 15\\

b) if 10 of the unemployed people get discouraged and give up looking for work, the number of unemployed becomes 2 persons, (12 - 10 = 2).

\therefore unemployment\ rate = \frac{2}{80} \times 100 = \frac{200}{80} =  2.5

6 0
2 years ago
A. Cash receipts from customers for services rendered __________ Operating __________Inflow
vaieri [72.5K]

Answer:

a. Cash receipts from customers for services rendered

Indication: <u>Operating activities </u>and <u>Cash Inflow</u>

b. Sale of long-term investments for cash

Indication: <u>Investing actiivity</u> and <u>Cash Inflow </u>

c. Acquisition of property, plant and equipment for cash

Indication: <u>Investing activity</u> and <u>Cash Outflow</u>

d. Payment of income taxes

Indication: <u>Operating activity</u> and <u>Cash Outflow</u>

e. Bonds payable issues for cash

Indication: <u>Financing Activity</u> and <u>Cash Outflow</u>

f. Payment of cash dividends declared in previous year

Indication: <u>Financing activity</u> and <u>Cash Outflow</u>

g. Purchase of short-term investments (not cash equivalents) for cash

Indication: <u>Investing activity</u> and <u>Cash Outflow</u>

h. Purchases of inventory for cash

Indication: <u>Operating activity</u> and <u>Cash Outflow</u>

<u />

<u>Definition of terms</u>

<u>Operating Activity:</u> This activity will show how much the cash flow from the business in operating . This included net profit and changes in assets and liabilities and amortization expenses .

<u>Investing Activities</u>: This part is shows the where the money is invested or investment is sold.

<u>Financing Activities</u>: This activities will show the cash flow from financing activities between the reporting period example. Raising or payment of the fund through the common stock , preference and bonds etc.

5 0
3 years ago
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