If demand for a good falls, but the opportunity cost of making the good increases, then production of the good will:_______

The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $145 per share for months, and you believ

user100 [1]

<u>Solution and Explanation:</u>

a) Let us calculate the value of call using Put-Call Parity,

i.e. Put + Stock = Call + Present Value of Exercise Price (note that it is 6 - months time period)

$\text { i.e. } 8.19+145=\mathrm{call}+145 / 1.09^{\wedge} 0.5$

$\text { i.e. } 8.19+145=\mathrm{call}+145 / 1.044$

Therefore, Call = $ 14.31

b1) The option strategy best suited in the given condition is - Short or Sell Straddle.

In shorting a straddle, you simultaneously sell a call and a put, thereby earning premium in both the legs of the strategy. It is a neutral options strategy wherein profits can be made when stock price is expected to remain stagnant. However it is to be noted that the profits are limited to the option premium earned on call and put but the risk is unlimited. i.e. only when you are reasonably sure as to the stock price remaining more or less constant, go for short straddle.

b2) Assuming that we went for short straddle, we earn $ 8.19 premium on put and $ 14.31 premium on call i.e. we earn maximum of $ 22.50 on this stock due to our position in options.

b3) WITHOUT CONSIDERING TIME VALUE -

Now, CONSIDERING TIME VALUE - the stock price would need to swing in either direction by ( $22.50 * 1.09 \times 0.5)=$ $ 23.49 for us to start incurring losses.

c) Buy the call, sell the put and lend $ 138.8848

Let 'Price' in the table below denote the stock price at the end of 6 months.

If we take a long position in call, the immediate CF is $ 14.31 (premium outflow).

If we take a short position in put, the immediate CF is $ 8.19 (premium inflow)

Position Immediate CF CF in 6 months CF in 6 months

(if price < X) (if price > X)

Call (Long) -14.31 0 Price - 145

Put (Short) 8.19 - (145 - price) 0

Lending Position $145 / 1.09^{\wedge} 0.5=138.88$ 145 145

Total Price Price

NOTE- FIGURES ARE SUBJECT TO ROUNDING OFF.

3 0

3 years ago

After graduation, you decide to go into a partnership in an office supply store that has existed for a number of years. Walking

MakcuM [25]

Answer:

257 boxes

Explanation:

The computation is given below;

Daily Demand would be

= 5000 ÷ 365

Standard Deviation = 10 boxes

Lead Time = 2 Weeks + 3 Days = 17 Days

Service Level = 0.98

Reorder Point = avg(d) × LT + z × σd × sqrt(LT)

= 5000 ÷ 365 × 17 + 2.05 × 10 × 170.5

= 317

So, the number of boxes should be ordered is

= 317 - 60

= 257 boxes

6 0

3 years ago

When all companies and their managers in a society behave in a socially responsible way, business increases, quality of life inc

Mkey [24]

Available Options Are:

A. A climate of caring will pervade.

B. Lawlessness all but ceases to exist.

C. People look after their own interests.

D. Small business starts increase.

E. Inflation decreases.

Answer:

Option A. A climate of caring will pervade.

Explanation:

When the people in a society start acting socially responsible which means that they value every single life on earth because acting socially means sustainability which says that the future generation needs must not be compromised in meeting current generation needs. Hence when everyone will be thinking as a socially responsible person then their will be a climate of care and every life matter would be understood by every single person on earth.

7 0

4 years ago

A researcher wants to test if juvenile hormone (similar to testosterone) is associated with aggression in paper wasps. The resea

Lady_Fox [76]

Answer:

b. The pairs in which neither individual is given extra juvenile hormone is the control

Explanation:

This is an experiment in which the researcher wants to establish a relation between the aggresion in wasp with the juvenile hormone, but to know which are really the effects you need something to compare with, that is called the control group, that is usually in the normal conditions, in this case it corresponds to the pairs in which they don't give the extra juvenile hormone, so the researcher can compare the difference between this pair with the pair in which one of the individuals has extra juvenile hormone.

6 0

3 years ago

How many companies does donald trump own?

Alex787 [66]

I can't give you an exact number but he has companies in hotels, casinos, real estate, golf courses,<span>Controversy Hitting Brand Power, CNN says he has 144 in total businesses</span>

4 0

3 years ago

If demand for a good falls, but the opportunity cost of making the good increases, then production of the good will:________