William bought one ABC $45 call contract (i.e., the exercise price is $45) for a premium of $5 pershare.At expiration, he excised his right.The return on his investment hinges on the stock price at expiration.Which of the following is false?If the stock price at expiration is $57, his return is 166.67%.O If the stock price at expiration is $50, his return is 22.22%.O If the stock price at expiration is $52, his return is 55.56%.O If the stock price at expiration is $60, his return is 233.33%.

A call option is a financial derivative contract that gives the holder (buyer) the right, but not…

Answered: William bought one ABC $45 call…

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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Similar questions

Suppose you purchase one share of the stock of Volatile Engineering Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The dollar- weighted return on your investment is Answers: А. -1.75%. B. 8.00%. C. 4.08%. D. 8.53%. Е. 12.35%.
Dumo is a trader at ZNF Equity traders and has just identified a stock, UFSI Limited, which is currently trading at R25 per share. Dumo decides to take a long position in at-the money put option and simultaneously buys one share of UFSI stock. The put option expires in 3 months’ time and costs R2.5 per share. Assume a contract consists of one put option. Required: Identify the strategy employed by Dumo above.Tabulate the Profit to the strategy at expiration for the following Exercise price R30; Stock price 20. Exercise price R30; Stock price 35.
Suppose you purchase 20 call contracts on SAMSONG Co. stock. The strike price is $120, and the premium is $8. If the stock is selling for $140, $128, $120 per share at expiration, what are your call options worth? What is your net profit?
Paul sells a stock short for $50.76 per share and buys it back 1 year later for $54.99 after he covers a $2.81 per share dividend. What is Paul’s total return on this investment? (Round answer to 2 decimal places (e.g., 36.45). Use a negative sign for a negative return.)
H2. The current price of a non-dividend paying stock is 172.5. The continuously compounded risk free rate is 0.03. A savvy investor notices a mispriced five-year forward contract to pay 196 in exchange for one share of the stock. In order to exploit this mispricing, the investor shorts a share of the stock now, invests the money gained in the account earning 0.03, and then plans to settle the forward contract in five years. What is the final net earned by the investor?
Ryan Neal bought 1,400 shares of Ford at $15.82 per share. Assume a commission of 3% of the purchase price. Ryan sells the stock for $20.13 with the same 3% commission rate. What is the gain or loss for Ryan? (Input the amount as a positive value. Round your answer to the nearest cent.)
Today, Andrew sold 3,600 shares of Colts stock for $26.60 per share. Andrew paid $101,124 for the 3,600 shares one year ago. What is the total return on this investment if the dividend yield is 1.90%? Group of answer choices -3.98% -3.40% -2.29%-3.40%
Suppose Alex has an opportunity to buy shares of Sunnyland Snacks Company. The shares are expected to pay a dividend of $2.50 per share in one year and to sell for $92.00 per share at that time. a. Suppose the current interest rate on safe assets is 5% and Alex believes that investing in Sunnyland is not risky. How much would Alex be willing to pay today for each share of the company? b. Suppose the current interest rate on safe assets is 5%. Alex is willing to pay at most $85.90 for each share of Sunnyland today. Calculate Alex’s risk premium.
You sold a put contract on EDF stock at an option price of $.25 and an exercise price of $22.50. The option expires today when EDF stock is selling for $21.70 a share. Ignoring transactions costs and taxes, what is your total profit on this investment?
1) Andy is bearish on USL and decides to sell short 20, 000 shares at the current market price of $120 per shar e. The initial margin is 50%. The margin account pays n o interest. Three days later, the price of USL has risen t o $130. a. What is the remaining margin in the account? b. If the maintenance margin is 30%, will Andy receive a margin call? c. Calculate the rate of return on the short position.
Dumo is a trader at ZNF Equity and has just identified a stock. UFSI Limited which is currently trading at R25 per share. Dumo decides to take a long position in at-the money put option and simultaneously buys one of the UFSI stock. The put option expires in 3 months' time and costs R2.5 per share. Assume a contract consists of one put option. Identify the strategy employed by Dumo above. Tabulate the Progut to the strategy at expiration for the following, Exercise price R30 ; Stock price 20. Exercise price R30; Stock price 35.
Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has a par value of $60 and pays an annual dividend of $5.60 per share. Similar-risk preferred stocks are currently earning an annual rate of return of 7.1%. a. What is the market value of the outstanding preferred stock? b. If an investor purchases the preferred stock at the value calculated in part a, how much does she gain or lose per share if she sells the stock when the required return on similar-risk preferred stocks has risen to 8.6%?

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