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

See similar textbooks

Similar questions

Wendy purchased 800 shares of Genetics Stock at $15 per share on 1/1/12. Wendy sold the shares on 12/31/12 for $10. Genetics stock has a beta of 0.58, the risk-free rate of return is 0.031, and the market risk premium is 9%. Wendy's holding period return is Instruction: Type your answer as a decimal, and round to three decimal places
Cindy buys a stock on January 1 for $25. It pays a total dividend of $1 during the first year, and trades for $30 at the end of the first year. During the second year, it pays a total of $2 in dividends, and at the end of the second year, the stock trades for $26. What is Cindy's holding period return? Question 5 options: -13.33% 7.85% -6.67% 16%
Question 6 Answer parts a), b) and c) based on the information below: Kasandra has purchased 1,000 shares in ABC Ltd for $40 each. Her analysis suggests that the following four states of the economy with respective probabilities can affect the price of the share next year. She also expects to receive a dividend of $2 per share next year. States of economy Probability Price Boom 10% $50 Good 30% $48 Normal 40% $42 Recession 20% $30 a) For each scenario above, calculate the total holding period return for Kasandra. Calculate the expected return from this investment considering all scenarios. Round your answer to the nearest 0.01%. b) Calculate the total risk of this investment. Round your answer to the nearest 0.01%. /
Ghaith has bought shares of RIO, Inc. stock for $25.00 per share. He expects a $1.00 dividend at the end of this year. After 2 years, he expects to receive a dividend of $1.25 and to sell the stock for $28.75. What is Ghaith's required rate of return?
Assume you purchased the right to sell 2,000 shares of Target stock in February 2022 at a strike price of $240 per share. Suppose Target stock sells for $212 per share immediately before your options’ expiration. What is the rate of return on your investment? What is your rate of return if the stock sells for $268 per share (think about it)? Assume your holding period for this investment is exactly three months. Note: A negaive value should be indicated by a minus sign. Do not round intermediate calculations. Enter your 3-month returns as a percent rounded to 2 decimal places.
3. Kelly has one share of a stock. She has two days to sell her stock. At the opening of the stock market on each day, she decides whether to hold or sell the stock. If she decides to sell the stock, she sells it at the opening price. On each day, the stock price is expected to increase by $20 with probability 0.4 and decrease by $16 with probability 0.6 at the closing of the market. Assume that the opening price on the first day is $100. Kelly wants to maximize her wealth. a. Construct a decision tree for Kelly's stock selling problem. b. Find an optimal decision strategy for Kelly using the expected value approach. What is the expected value of the optimal decision strategy? Show the backward pass procedure.
Gareth owns 1 share of stock A and 1 share of stock B. In 1 year from today, the total value of his holdings is expected to be 119.42 dollars. Stock A is currently priced at 47.13 dollars, has an expected return of 12.58 percent, and is expected to pay a dividend of 6.54 dollars in 1 year from today. Stock B is currently priced at 74.88 dollars and is expected to pay a dividend of 5.93 dollars in 1 year from today. What is the expected return for stock B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
Assume we are in July, 2023. In July of 2023, the share prices of company B are $80 per share. You believe they should be $30 per share, and are thus overvalued. December 2023 put options on a strike price of $60 per share are currently valued at $5. Each put contract is based on 100 shares. a.) What is your net dollar profit or loss as a holder of the put contract (based ona contract size of 100 shares) if we arrive at expiry in December and you are wrong and Company B shares are selling for $100?
23) 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: a) Identify the strategy employed by Dumo above. b) Tabulate the Profit to the strategy at expiration for the following i. Exercise price R30; Stock price 20. i. Exercise price R30; Stock price 35.
Assume we are in July, 2023. In July of 2023, the share prices of company B are $80 per share. You believe they should be $30 per share, and are thus overvalued. December 2023 put options on a strike price of $60 per share are currently valued at $5. Each put contract is based on 100 shares. a.) What is your net dollar profit or loss as a holder of the put contract (based ona contract size of 100 shares) if we arrive at expiry in December and you are wrong and Company B shares are selling for $100? (Show your working in full)
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: Tabulate the Profit to the strategy at expiration for the following Exercise price R30; Stock price 20. Exercise price R30; Stock price 35. ST =20 ST =35 Stock Put (Pt) Premium Total profit
You purchase one put option contract on AMD with an exercise price of $100 for a premium of $3.7. You hold the option until the expiration date, when AMD sells for $108 per share. One contract is on 100 shares of the underlying stock. Compute your profit. Your Answer: Answer

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS