(2) A long position in a put option with an exercise price of $50 and a front-end pre- mium expense of $3.23 (3) A short position in a put option with an exercise price of $50 and a front-end pre- mium receipt of $3.23 Expiration Date Sophia Stock Price 25 30 35 40 45 50 55 60 65 70 75 Expiration Date Derivative Payoff Derivative Premium Initial Net Profit
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- PROBLEMS 1. The common stock of Sophia Enterprises serves as the underlying asset for the following derivative securities: (1) forward contracts, (2) European-style call options, and (3) European- style put options. a. Assuming that all Sophia derivatives expire at the same date in the future, complete a table similar to the following for each of the following contract positions: (1) A long position in a forward with a contract price of $50 (2) A long position in a call option with an exercise price of $50 and a front-end pre- mium expense of $5.20 Expiration Date Expiration Date Sophia Stock Price Derivative Payoff Derivative Premium Net Profit 25 30 35 40 45 50 55 60 65 Initial 70 75 (3) A short position in a call option with an exercise price of $50 and a front-end premium receipt of $5.20 In calculating net profit, ignore the time differential between the initial derivative ex- pense or receipt and the terminal payoff. b. Graph the net profit for each of the three derivative…1- The common stock of Sophia Enterprises serves as the underlying asset for the following derivative securities: (1) forward contracts, (2) European-style call options, and (3) European-style put options. a. Assuming that all Sophia derivatives expire at the same date in the future, complete atable similar to the following for each of the following contract positions:(1) A long position in a forward with a contract price of $50. Expiration DateSophia Stock Price Expiration DateDerivative Payoff InitialDerivative Premium Net Profit 25 30 35 40 45 50 55 60 65 70 75 2- Refer once again to the derivative securities using Sophia common stock as an underlyingasset discussed in Problem 1.a. Assuming that all Sophia derivatives expire at the same date in the future, complete atable similar to the following for each of the following contract positions:(1) A short position in a forward with a…The common stock of Sophia Enterprises serves as the underlying asset for the following derivative securities: (1) forward contracts, (2) European-style call options, and (3) European-style put options. a.Assuming that all Sophia derivatives expire at the same date in the future, complete a table similar to the following for each of the following contract positions:(1) A short position in a forward with a contract price of $50 (2) A long position in a put option with an exercise price of $50 and a front-end premium expense of $3.23 (3) A short position in a put option with an exercise price of $50 and a front-end premium receipt of $3.23 Expiration DateSophia Stock Price Expiration DateDerivative Payoff InitialDerivative Premium Net Profit 25 30 35 40 45 50 55 60 65 70 75 In calculating net profit, ignore the time differential between the initial derivative expense or receipt and the terminal…
- The common stock of Sophia Enterprises serves as the underlying asset for the following derivative securities: (1) forward contracts, (2) European-style call options, and (3) European-style put options. a. Assuming that all Sophia derivatives expire at the same date in the future, complete a table similar to the following for each of the following contract positions: (1) A long position in a forward with a contract price of $50 (2) A long position in a call option with an exercise price of $50 and a front-end premium expense of $5.20 Expiration Date Sophia Stock Price Expiration Date Derivative Payoff Initial Derivative Premium Net Profit 25 30 35 40 45 50 55 60 65 70 75 (3) A short position in a call option with an exercise price of $50 and a front-end premium receipt of $5.20 In calculating net profit, ignore the time…which one is correct please confirm? Q9: Parties who have bought a futures contract and thereby agreed to _____ (take delivery of) the bonds are said to have taken a ____ position. sell; short buy; short sell; long buy; longwhich one is correct please confirm? Q5: Parties who have sold a futures contract and thereby agreed to _____ (deliver) the bonds are said to have taken a ____ position sell; short buy; short sell; long buy; long
- Consider a security that pays income to its holders (e.g., a dividend-paying stock, or acoupon bond). Should the forward price of this security (for a contract that matures attime T), F0,T, be higher than, lower than, or equal to the security's current spot price?Why?.1. a) Please name one deal on theFX spot market:FX derivative market:b) Please briefly explain operational risk.Please support your explanation by a typical example of operational risk.c) Please briefly explain the difference between a (common) share and a (fixed coupon)bond.Define each of the following terms:a. Derivative; natural hedgeb. Option; call option; put optionc. Long-term Equity Anticipation Security (LEAPS)d. Exercise value; strike (exercise) pricee. Binomial Option Pricing Model; Black–Scholes Option Pricing Model; riskless hedgef. Futures contract; forward contractg. Commodity futures; financial futuresh. Swap; structured notei. Inverse floaterj. Risk managementk. Speculationl. Hedging; long hedges; short hedges; perfect hedge
- 1. A debenture is: Group of answer choices a secured bond a callable bond an unsecured bond a redeemable bond 2. A convertible bond Group of answer choices comes with a retractable top can be called in for early retirement can be turned in by the investor for early retirement can be swapped for other securities of the issue, typically stock 3. The coupon interest rate: Group of answer choices is the same as the effective interest rate is the same as the market interest rate is smaller than the stated interest rate. is the same as the stated interest rate 4. A bond has a face value of $10,000,000. It has a stated interest rate of 5% and a market interest rate of 6%. It sold for $900,000. It pays interest once a year on December 31. How much interest will the company pay each year? Group of answer choices $500,000 $450,000 $600,000 $540,000 5. A bond has a stated interest rate of 13% and a market…Define each of the following terms: a. Derivatives b. Enterprise risk management c. Financial futures; forward contract d. Hedging; natural hedge; long hedge; short hedge; perfect hedge; symmetric hedge; asymmetric hedge e. Swap; structured note f. Commodity futures19. The fair value of an equity share option is measured based on 1. the observable market price of an option with the same or similar terms and conditions 2. estimated using an option-pricing model. 3. using the intrinsic value at the end of each reporting period, and final compensation cost is measured at the settlement date. a. 2 only b. 3 only c. 2 and 3 but not 1 d. 1 and 3, but not 2 e. 1 and 2, but not 3 f. 1 only g. either of the 3, depending on the circumstances