Personal Finance, Student Value Edition (8th Edition) (The Pearson Series in Finance)
8th Edition
ISBN: 9780134730851
Author: Arthur J. Keown
Publisher: PEARSON
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Chapter 12, Problem 1PA
Summary Introduction
(a)
To determine:
Value of investment prior to the split.
Introduction:
Stock Split is the breakdown of shares of a company which increases the number of shares available to trade in market without affecting the market value or market capitalization of company.
Expert Solution
Explanation of Solution
Given,
Number of shares is 200 shares.
Price per share is $90.
Formula to calculate value of investment is,
Substitute 200 for number of shares and $90 for price per share in above equation.
Investment value is $18,000.
Conclusion
Hence, the investment value before share split is $18,000.
Summary Introduction
(b)
To determine:
Number of shares owned after stock split of three-for-one.
Introduction:
Three-for-one split means that for every single share held by a shareholder will now be three.
Expert Solution
Explanation of Solution
Given,
Number of shares is 200 shares.
Split Ratio is three-for-one.
Formula to calculate new number of shares,
Substitute 200 for number of shares and 3 for split ratio in above equation.
Number of shares after split is 600 shares.
Conclusion
Hence, the number of shares after three-for-one share is 600 shares.
Summary Introduction
(c)
To determine:
Price of shares after the split.
Introduction:
Price of share after split is adjusted with the market price by dividing the share price before stock split and the split ratio.
Expert Solution
Explanation of Solution
Given,
Price per share is $90.
Split ratio is three-for-one.
Formula to calculate price of share after stock split,
Substitute $90 for price per share and 3 for split ratio in the above equation.
New share price after split is $30.
Conclusion
Hence, the new share price after three-for-one stock split is $30.
Summary Introduction
(d)
To determine:
Value of investment after three-for-one split.
Introduction:
Value of investment after split
remains the same as before the stock split because there is no change in the value or price of shares.
Expert Solution
Explanation of Solution
Given,
Number of shares after stock split is 600 shares.
Price per share after stock split is $30.
Formula to calculate value of investment is,
Substitute 600 for number of shares and $30 for price per share in the above equation.
Investment value after stock split is $18,000.
Conclusion
Hence, the investment value after three-for-one share is $18,000.
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TABLE 10-6 Option Quotes, January 13, 2023
Underlying Asset: S&P 500 Index (SPX)
Closing Value: 3,999.09
Expiration
Strike Price
Calls
Puts
Last
Volume
Open Interest
Last
Volume
Open Interest
04-21-23
3990
140
0
258
164.6
0
223
04-21-23
4010
164.3
257
18,244
144.3
100
17,166
05-19-23
3990
200.7
210
30
169.1
210
52
05-19-23
4010
186.1
303
3,552
279.2
2
3,965
06-16-23
3990
223.3
1
16
178.8
1
1
06-16-23
4010
152.9
0
46
183
1,665
42,159
12-15-23
3975
361
100
2,555
250.1
32
2,438
12-15-23
4025
349.3
0
2,416
268.2
4
2,149
OPTIONS ON INTEREST RATE FUTURES
Underlying Asset: March 2023 30-Year Treasury Bond Future
Prior Settle: 130'02
Expiration
Strike Price
Calls
Puts…
Chapter 12 Solutions
Personal Finance, Student Value Edition (8th Edition) (The Pearson Series in Finance)
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