You are bearish on Telecom and decide to sell short 100 shares at the current market price of $36 per share. Required: a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.) Stock price reaches

You are bearish on Telecom and decide to sell short 100 shares at the current market price of $36 per share. Required: a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.) Stock price reaches

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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ABC has 1 million shares outstanding, each of which has a price of $24. It has made a takeover offer of XYZ Corporation which has 1 million shares outstanding, and a price per share of $2.39. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms. a. Assume ABC made a cash offer to purchase XYZ for $5.04 million. What happens to the price of ABC and XYZ on the announcement? What premium over the current market price does this offer represent? b. Assume ABC makes a stock offer with an exchange ratio of 0.21. What happens to the price of ABC and XYZ this time? What premium over the current market price does this offer represent? c. At current market prices, both offers are offers to purchase XYZ for $5.04 million. Does that mean that your answers to parts (a) and (b) must be identical? Explain. a. Assume ABC made a cash offer to purchase XYZ for $5.04 million. What happens to the price of ABC…
The balance sheet for Shankland Corporation follows: 000'009 $ 000006 Current assets Long-term assets (net) Total assets Current liabilities Long-term liabilities Total liabilities Common stock and retained earnings 000 0000 000 00 000 009' 000 006 Total liabilities and stockholders' equity 000'00s Required Compute the following. (Round "Ratios" to 1 decimal place.) Working capital Current ratio Debt-to-assets ratio Debt-to-equity ratio
In follow an Ito process with >0, a stock is worth $80 today, if the price of an option that pays the holder $2 exactly the first time the stock price reaches $200, what is the price of an option? Show all calculation.
You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $240 at year-end. XYZ currently sells for $240. Over the next year, the stock price will either increase by 7% or decrease by 7%. The T-bill rate is 3%. Unfortunately, no put options are traded on XYZ Company. Required: a. How much would it cost to purchase if the desired put option were traded? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What would be the cost of the protective put portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
solve a,b,c and d please. round to nearest dollar
Finance Suppose that you are writing 5 call contracts on TGT with a strike price of $157.50. The premium is $2.50 per share. Answer the following: (1) Will this option be exercised if the stock price at expiration is $159.25? And more importantly, why (or WHY NOT?) Note: in practicing written communication, your brief answer should be in complete sentences in plain English such that an “average Joe” can follow your line of thought. (2) Calculate your TOTAL profit (loss) if TGT stock price at expiration is $159.25 per share.
solve a,b,c and d please. round to nearest dollar
What is Temporary financing?
You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $210 at year-end. XYZ currently sells for $210. Over the next year, the stock price will either increase by 10% or decrease by 10%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. How much would it cost to purchase if the desired put option were traded? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cost to purchase b. What would be the cost of the protective put portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cost of the protective put portfolio
You would like to be holding a protective put position on the stock of XYZ Co. to lock in a guaranteed minimum value of $109 at year- end. XYZ currently sells for $109. Over the next year the stock price will increase by 12% or decrease by 12%. The T-bill rate is 6%. Unfortunately, no put options are traded on XYZ Co. a. Suppose the desired put option were traded. How much would it cost to purchase? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Cost to purchase b. What would have been the cost of the protective put portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Cost of the protective put portfolio c. What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with X = 109? Show that the payoff to this portfolio and the cost of establishing the portfolio match those of the desired protective put. (Do not round…
can someone help me with this please and no excel
You think that there is an arbitrage opportunity on the market. The current stock price of Wesley corp. is $20 per share. A one- year put option on Wesley corp. with a strike price of $18 sells for $3.33, while the identical call sells for $7. The one-year risk- free interest rate is 8%. Assuming that the put option is fairly priced, compute the fair price of the call option and explain what you must do to exploit this arbitrage opportunity and what will be your gain.

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