Sarafiny Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are p
1 answer:
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Answer:
$95.45%
Explanation:
The computation of the probability of getting a return between -28% and 64% in any one year is shown below:-
Particulars Percentage
Total probability 100%
Less:
Probability that return will be lower
than -28% 2.28%
1- (NORMDIST (-28%,18%,23%,TRUE)
Probability that return will be More
than 64% 2.28%
(NORMDIST (64%,18%,23%,TRUE)
Probability of getting a return between
-28% and 64% $95.45%
Answer:
Put options give the holder the right to sell the underlying stock to the seller of the put option.
Put options are advantageous when the price in the market falls below the strike price of the option because the buyer will be able to sell at above market value and make a profit.
The asking price for a strike price of $9.00 is listed to be $0.33 and this is the premium paid by the buyer of the Put Option.
<h2>1. Return if stock sells for $8.00</h2>
= Amount received/ Amount spent
= (No. of shares * ((Strike price - Market price) - Premium paid) ) / (No. of share * premium)
= (2,300 shares * (($9.00 - 8.00) - 0.33))/ ( 2,300 * 0.33)
= 2.03
= 203 %
<h2>2. Return if stock sells for $10.00. </h2>As this is an option, the investor can decide not to sell to the seller. The market price is higher than the strike price so they will not sell to the seller of the option and the return will be;
= (No. of shares * - Premium paid) ) / (No. of share * premium)
= (2,300 shares * - 0.33)/ ( 2,300 * 0.33)
= -1
= -100 %
