The Gifford Investment Company bought 120 Cable Corporation warrants one year ago and would like to exercise them today. Thewarrants were purchased at $32 each, and they expire when trading ends today. (Assume there is no speculative premium left.) CableCorporation common stock was selling for $45 per share when Gifford Investment Company bought the warrants. The exercise price is$33, and each warrant entitles the holder to purchase two shares of stock, each at the exercise price.a. What was the intrinsic value of a warrant at the time of purchase?Note: Do not round intermediate calculations.Intrinsic valueb. What was the speculative premium per warrant when the warrants were purchased? The purchase price, as indicated earlier, was$32.Note: Do not round intermediate calculations.Speculative premiumc. What would Gifford's total dollar profit or loss have been had they invested the $3,840 directly in Cable Corporation's commonstock one year ago at $45 per share? Cable Corporation common stock is selling today for $55 per share.Note: Do not round intermediate calculations and round your answer to 2 decimal places. Input the dollar amount as a positivevalue.

Solution (a) Intrinsic value = (Stock price -Exercise price)* Stock per warraantsor Intrinsic value…

Answered: The Gifford Investment Company bought…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Jeff Sellers bought 200 shares of ATL stock at $29.38. Eight months later, he sold the stock at $31.63. Assuming a 2% commission charge, what is the bottom line for Jeff? (Round your answer to the nearest cent.)
Knightly Co’s stock price is currently $10 per share. Knightly's warrants have a price of $7 per warrant. Each warrant enables the holder to purchase three shares of Knightly's common stock for $8 per share. What is the speculative premium on the warrant?
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Two years ago, you purchased 100 shares of General Mills Corporation. Your purchase price was $56 a share, plus a total commission of $33 to purchase the stock. During the last two years, you have received the following dividend amounts: $1.40 per share for the first year and $1.50 per share the second year. Also, assume that at the end of two years, you sold your General Mills stock for $66 a share minus a total commission of $33 to sell the stock. Calculate the dividend yield for your General Mills stock at the time you purchased it. Note: Enter your answer as a percent rounded to 2 decimal places. Calculate the dividend yield for your General Mills stock at the time you sold it. Note: Enter your answer as a percent rounded to 2 decimal places. Calculate the total return for your General Mills investment when you sold the stock at the end of two years. Note: Do not round intermediate calculations. Round your final answer to the nearest whole number. Calculate the annualized…

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