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3 years ago

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Three-month European put options with strike prices of $50, $55, and $60 cost $2, $4, and $7, respectively. What is the maximum

gain when a butterfly spread is created from these put options?

1 answer:

Vladimir79 [104]3 years ago

3 0

Answer:

hiii...myself tanvi new on brainly...can get some help from you plz....to know the people

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Caliber Corp. currently pays no dividends because it requires its internally generated funds be used to fund a research intensiv

Andreyy89

Answer:

Do = $2.00

D1= Do(1+g)1 = $2(1+0.2)1 = $2.40

D2= Do(1+g)2 = $2(1+0.2)2 = $2.88

D3= Do(1+g)3 = $2(1+0.2)3 = $3.456

D4= Do(1+g)4 = $2(1+0.2)4 = $4.1472

D5= Do(1+g)5 = $2(1+0.2)5 = $4.97664

PHASE 1

V1 = D1/1+ke + D2/(1+ke)2 + D3/(1+ke)3 +D4/(1+ke)4 + D5/(1+ke)5

V1 = 2.40/(1+0.15) + 2.88/(1+0.15)2 + 3.456/(1+0.15)3 + 4.1472/(1+0.15)4 + 4.97664/(1+0.15)5

V1 = $2.0870 + $2.1777 + $2.2723 + $2.3712 + $2.4742

V1 = $11.3824

PHASE 2

V2 = DN(1+g)/ (Ke-g )(1+k e)n

V2 = $4.97664(1+0.02)/(0.15-0.02)(1+0.02)5

V2 = $5.0762/0.1435

V2 = $35.3742

Po = V1 + V2

Po = $11.3824 + $35.3742

Po = $46.76

Explanation: This is a typical question on valuation of shares with two growth rate regimes. In the first phase, the value of the share would be obtained by capitalizing the dividend for each year by the cost of equity of the company. The dividend for year 1 to year 5 was obtained by subjecting the current dividend paid(Do) to growth rate. The growth rate In the first regime was 20%.

In the second phase, the value of shares would be calculated by taking cognizance of the second growth rate of 2%. In this phase, the last dividend paid in year 5 would be discounted at the appropriate discount rate after it has been adjusted for growth.

5 0

3 years ago

Diminishing returns to physical capital means that when the amount of human capital per worker and the state of technology are h

-BARSIC- [3]

Answer:

a. a smaller increase in the marginal product of labor.

Explanation:

The law of diminishing returns to physical capital states that as more and more input are added to fixed factors of production, output increases at a decreasing rate.

For there to be output growth, physical capital should be increased less than human capital and technological progress.

I hope my answer helps you

6 0

3 years ago

Which of the following best describes how consumers make financial decisions in a market economy? A. The media forces consumers

notka56 [123]

Answer:

B. They make choices based on their self-interests.

Explanation:

A market economy can be defined as the economy of a country where by the government has a minimal influence or intervention on how the market operates.

A market economy is regulated by the individuals that owns the businesses in that economy. These individuals have the ability to direct resources that they need from production to their firms and businesses.

A market economy is largely or greatly influenced and regulated by the rate of supply and demand. Consumers in a market economy have to sometimes paid a high price for the goods and services that they require. Consumers make financial decisions in a market economy by making their choices based on self interests.

A market economy is a very competitive economy because

a. the demand of goods and services by consumers have increased therefore this results in an increase in production of goods and services.

b. The producers tend to high innovative when producing this goods and services required by the consumers.

In a market economy, businesses and firms tend to have an increased of a very high rate of efficiency when producing goods and services such that they minimise or lower the cost of production while ensuring that they make high or huge amounts of profits.

4 0

3 years ago

The four traits of constructive criticism are _______.

Dmitrij [34]

Answer:

The answer to this question is given below in the explanation section.

Explanation:

Constructive criticism is the process to offer valid and well-reasoned reponed or opinion about other works, it includes both positive and negative comments in a friendly way rather than an oppositional one.

There are four traits of constructive critisim.

So, the correct answer to this question is given below:

D: Positivity, Solution-Oriented, Specific, and private.

While other options are not correct because the four traits of constructive criticism are starting from positivity, solution-oriented, specific, and private.

8 0

2 years ago

Read 2 more answers

Use the following information to answer this... Use the following information to answer this question. Windswept, Inc. 2010 Inco

prisoha [69]

Answer:

The Quick ratio: 0.86:1

Explanation:

The question is completed first as follows:

Windswept, Inc. 2009 and 2010 Balance Sheets ($ in millions) 2009 2010 2009 2010 Cash $ 270 $ 300 Accounts payable $ 1,530 $ 1,485 Accounts rec. 1,080 980 Long-term debt 1,140 1,340 Inventory 1,930 1,755 Common stock $ 3,420 $ 3,370 Total $ 3,280 $ 3,035 Retained earnings 680 930 Net fixed assets 3,490 4,090 Total assets $ 6,770 $ 7,125 Total liab. & equity $ 6,770 $ 7,125 What is the quick ratio for 2010?

Solution:

The requirement is to use the given information to calculate Windswept Inc's Quick ratio for 2010.

Quick ratio: this represents the ability of an organisation's short term liquidity to cover and cater for its short term obligation. Basically, it looks at the ratio of the current assets of an organisation (those that can be quickly converted to cash) to meet the current liabilities.

The formula for quick ratio= Current Assets - Inventory / Current Liabilities

Windswept's quick ration = Cash + Accounts receivable / Accounts Payable (all for 2010)

= $300 + 980 / $1, 485

= $1,280/$1,485

= 0.86:1

This means that the current asset of the company can only cover its current obligations up to about 86%. This is the quick ratio.

5 0

3 years ago