Chris Johnson has observed Kayangan Industries Berhad and Hartalega Holding Berhad share on the Bursa Malaysia Derivatives market. He is interested to invest in those shares, and he has proposed to the fund manager to analyze which investment should he invest. The information for those shares is as follows: Kayangan Industries is currently trading at RM55 per share and does not pay dividend with the volatility of 35 percent. The current risk-free rate of interest is 11 percent with a strike price of RM53 that expires in five months. (ii) (i) Hartalega Holding has a share price at RM26.70 and it is expected to pay a dividend of RM0.80 per share in May 2021. The strike price is RM28.50. The risk-free interest rate is 15.3 percent per annum and the variance is 8.6 percent. The share will expire in 1 year 3 months. Based on the information above: (a) Calculate the value of call option for Kayangan Industries and put option for Hertalega Holding.

Chris Johnson has observed Kayangan Industries Berhad and Hartalega Holding Berhad share on the Bursa Malaysia Derivatives market. He is interested to invest in those shares, and he has proposed to the fund manager to analyze which investment should he invest. The information for those shares is as follows: Kayangan Industries is currently trading at RM55 per share and does not pay dividend with the volatility of 35 percent. The current risk-free rate of interest is 11 percent with a strike price of RM53 that expires in five months. (ii) (i) Hartalega Holding has a share price at RM26.70 and it is expected to pay a dividend of RM0.80 per share in May 2021. The strike price is RM28.50. The risk-free interest rate is 15.3 percent per annum and the variance is 8.6 percent. The share will expire in 1 year 3 months. Based on the information above: (a) Calculate the value of call option for Kayangan Industries and put option for Hertalega Holding.

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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2. (a) Chris Johnson has observed Kayangan Industries Berhad and Hartalega Holding Berhad share on the Bursa Malaysia Derivatives market. He is interested to invest in those shares, and he has proposed to the fund manager to analyze which investment should he invest. The information for those shares is as follows: (i) Kayangan Industries is currently trading at RM55 per share and does not pay dividend with the volatility of 35 percent. The current risk-free rate of interest is 11 percent with a strike price of RM53 that expires in five months. (ii) Hartalega Holding has a share price at RM26.70 and it is expected to pay a dividend of RMO.80 per share in May 2021. The strike price is RM28.50. The risk-free interest rate is 15.3 percent per annum and the variance is 8.6 percent. The share will expire in 1 year 3 months. Based on the information above: i. Calculate the value of call option for Kayangan Industries and put option for Hertalega Holding.
(a) share on the Bursa Malaysia Derivatives market. He is interested to invest in those shares, and he has proposed to the fund manager to analyze which investment should he invest. The information for those shares are as follows: Chris Johnson has observed Kayangan Industries Berhad and Hartalega Holding Berhad (1) Kayangan Industries is currently trading at RM55 per share and does not pay dividend with the volatility of 35 percent. The current risk-free rate of interest is 11 percent with a strike price of RM53 that expires in five months. (ii) Hartalega Holding has a share price at RM26.70 and it is expected to pay a dividend of RM0.80 per share in May 2021. The strike price is RM28.50. The risk-free interest rate is 15.3 percent per annum and the variance is 8.6 percent. The share will expiry in 1 year 3 months. Based on the information above: i. Calculate the value of call option for Kayangan Industries and put option for Hertalega Holding. ii. Chris Johnson fund managers' has…
You have recently been appointed as the investment analyst of Investalot (Pty) Ltd.You are given a table with a list of companies, their stocks and their possible payoffsfor every rand invested as follows:Stock Year 1 (R) Year 2 (R) Year 3 (R)Discovery Ltd 0.8 0.2 0.1Foschini Group Ltd 0.7 0.75 0.55Famous Brands Ltd 0.4 0.15 0.75Required:Using the Minimax regret method choose the stock that will minimise yourmaximum regret.
(Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 2.5 percent, and the expected return for the market portfolio is 10 percent. What should be the expected rates of return for each investment? Security A B Beta 1.72 0.77 a. The expected rate of return for security A, which has a beta of 1.72, is %. (Round to two decimal places.)
(Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 4 percent, and the expected return for the market portfolio is 10 percent. What should be the expected rates of return for each investment? Security Beta A 1.67 B 0.58 C 1.14 D 0.78 (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The expected rate of return for security A, which has a beta of 1.67, is enter your response here%. (Round to two decimal places.) Part 2 b. The expected…
An analyst gathered the following information about a common stock investment. The stock does not pay a dividend. The money-weighted and time-weighted rates of return on the investment are closest to: Date Amount Stock purchase 1 15 January 2006 €86 Stock purchase 2 15 January 2007 €94 Stock sale (2@106) 15 January 2008 €212 A) Money-weighted rate of return is 11.02% and Time-weighted rate of return is 8.53%B) Money-weighted rate of return is 11.02% and Time-weighted rate of return is 11.029%C) Money-weighted rate of return is 11.60% and Time-weighted rate of return is 11.02%
Identify and explain the markets in which the following in which the following trade in: used cars, paintings and rare coins. If, An investor initially pays K6 000 towards the purchase of K10 000 worth of shares at K100 each borrowing the rest from a broker, draw up the investor’s simple balance sheet to reflect this transaction and Calculate the initial margin and the margin if the share price falls to K70. Suppose the maintenance margin is 30 %. How far could the stock price fall before the investor would get a margin call? Suppose the margin is 40 %. How far can the stock price fall before the investor gets a margin call? An investor is bullish on a stock selling for K100. He instructs his broker to sell short 1000 borrowed shares. If the broker has a 50 % requirement on short sales, draw up the investor’s simple balance sheet to reflect this transaction. What will happen if the share price falls to K70? If the broker has a maintenance margin of 30 % on short sales,…
Stan Dardevian is a derivatives trader for Random House Investments. The firm seeks arbitrage opportunities in the forward and futures markets using the carry arbitrage model. Stan Dardevian considers an equity forward contract for Gizmos R US, Inc. (GRU). Information regarding GRU common shares and a GRU equity forward contract is presented in Exhibit 2. EXHIBIT 2. + GRU has historically paid dividends every six months. + The price per share of GRU's common shares is $250. + The forward price per share for a nine-month GRU equity forward contract is $250.60913. + The risk-free rate is 0.325% (quoted on an annual compounding basis). + Assume annual compounding. Stan Dardevian takes a short position in the GRU equity forward contract. His supervisor, Margie Noverro, asks, "Under which scenario would our position experience a loss?" Three months after contract initiation, Stan Dardevian gathers information on GRU and the risk-free rate, which is presented in Exhibit 3. EXHIBIT 3 + The…
You are tasked with comparing two Icelandic equity funds. The other fund is called the RU IS Equity Fund (RIS). The other fund is called HÍ IS Equity Fund (HIS). It is known that the funds had the following ratios in certain shares over the period 2018 to 2021 (it is not assumed that they received dividends during the period). The proportions did not change over the period. The price of individual shares over the period can be found in the red box down below the text. a) What was the average annual return of RIS and HIS over the period
The following information relates to five stocks listed in five different sectors at the Nairobi Securities Exchange .The return on treasury bills is 4% and the average return in the market has been found to be 10% Estimated Return(%) Beta Sasini Ltd 8 0.7 Stanbic Holdings 6.2 1 Scan group Ltd 15 1.2 Crown Paints Kenya 10.5 1.4 Sanlam Kenya PLC 13 -0.4 Required: Using the capital asset pricing model (CAPM) determine the Required Rate of Return (RRR) for each stock and state whether it is undervalued, overvalued or fairly valued.
The following limited information is available for returns on two shares listed on the Lusaka Securities Exchange (LuSE) in Zambia. Year Gipley Petros 2001 0.20 0.16 2002 0.28 0.12 2003 0.36 0.10 2004 0.12 0.18 Despite the limited number of readings, a normal distribution of returns may be assumed, In addition, past performance is considered to reflect expected future performance. Required, a) Calculate for each of the shares; i. The average return ii. Standard deviation iii. Coefficient of variation b) Taking the role of an investment advisor, recommend one of the two shares to a client who wishes to make a choice between an investment in Gipley Ltd or an investment in Petros Ltd. Advise the client of some of the issues which should be considered.
a) Caty wanted to hedge her company exposure in commodity, stocks, interest rates and currencies on derivatives market. You are assigned by your bank manager to explain to her on the derivatives instrument that available in Malaysia market and recommend the appropriate hedging for her company. b) Based on the table below, you invested 40% on Stock A and B and 20% on Stock C. Calculate the expected return on this portfolio. Year Expected rate of returns Stock A Stock B Stock C 1 0.18 0.13 0.05 2 0.17 0.12 0.10 3 0.02 0.07 0.13 4 0.12 0.09 0.16 5 0.12 0.08 0.28

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