The difference between who you

The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced

konstantin123 [22]

Answer:

A) according to put call parity:

price of put option = call option - stock price + [future value / (1 + risk free rate)ⁿ]

put = $6.93 - $125 + [$140 / (1 + 5%)¹/⁴] = $6.93 - $125 +$138.30 = $20.23

B)

you have to purchase both a put and call option ⇒ straddle

the total cost of the investment = $6.93 + $20.23 = $27.16, this way you can make a profit if the stock price increases higher than $125 + $20.23 = $145.23 or decreases below than $125 - $20.23 = $104.77

4 0

3 years ago

Gargoyle Unlimited Gargoyle Unlimited is planning to issue a zero coupon bond to fund a project that will yield its first positi

asambeis [7]

Answer:

The answer is 6.72%

Explanation:

Calculating the imputed rate from a discount bond as follows:

( 1 + i )^n = FV / PV

( 1 + i )^3 = FV / PV, here FV= 1000 and PV= 727.25

so putting values in equation we have:

( 1 +i )^3 = 1000 / 727.25

( 1 + i )^3 = 1.375

solving for i

( 1 + i) = 1.375^1/3

( 1 + i ) = 1.112

i = 0.112 before tax rate

0.112 * (1 - tax rate) = after tax interest rate

0.112 * .60 = 0.0672 = 6.72%

thus the expected after tax cost of this debt issue is 6.72%

5 0

2 years ago

You own 100 shares a $50 par value preferred stock. The stock has a 12% dividend rate, and a current market price of $85 per sha

andriy [413]

Answer:

Option (a) is correct.

Explanation:

Value of stock:

= Present value of all cash flows

$=Dividend[\frac{1-\frac{1}{(1+r)^{n} } }{r}] + Par\ value[\frac{1}{(1+r)^{n} }]$

$=50\times 0.12[\frac{1-\frac{1}{(1.08)^{5} } }{0.08}] + 50[\frac{1}{(1.08)^{5} }]$

= $6 × 3.9927 + $50 × 0.6806

= $23.96 + $34.03

= $57.99 or $58

5 0

3 years ago

Marco and Fred enter into a contract for the sale of Marco's apartment for which Fred agrees to pay him $100,000. Marco cannot p

VLD [36.1K]

Answer:

The correct answer is the option A: unconscionable

Explanation:

To begin with, the reason why such prohibition from Marco to Fred is unconscionable is due to the fact that Marco already stated in a private contract that he agreed to sell the apartment to Fred by a certain price, therefore establishing that the property of the real estate now belongs to the other party, letting everyone else external to the contract know that the proper and new owner is Fred.

Secondly, it is understandable that now that Fred is the new owner of the apartment by contract then it is unfair and unreasonable that the old owner Marco prohibits him to do what he wants with the apartment.

5 0

3 years ago

Henry wants to send his son to computer school which will start one year from today. Payments of $2,000 are due at the end of ea

egoroff_w [7]

Answer:

Henry shall invest $3,018 at present to get $2,000 at each year end for 2 years.

Explanation:

Provided interest rate = 12%

Payment to be made is at the end of year 2 and at the end of year 3

Because it is provided that the payment has to be made at the end of next two years,

Therefore,

Present value interest factor (PVIF) @ 12% for second and third year will be considered.

As today we are at beginning of year 1

First payment will be made at end of next year that is year 2

Second payment at end of third year that is year 3

PVIF

Year 2 = $\frac{1}{(1+0.12)^2}$ = 0.797 $\times$ 2,000 = $1,594

Year 3 = $\frac{1}{(1+0.12)^3}$ = 0.712 $\times$ 2,000 = $1,424

Present value of investment = $1,594 + $1,424 = $3,018

Final Answer

Henry shall invest $3,018 at present to get $2,000 at each year end for 2 years.

8 0

3 years ago