How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.

Which of the following is the best reason why the price-earnings method is often used by investors to estimate the fair price of a stock? a) Because the earning multiples are easily found in online financial databases. b) Earnings per share is a known amount that is related to the payment of future dividends. c) Because the price-earnings method gives the same answer as the constant growth method and is easier to compute. d) The price-earnings method has been shown to provide the most accurate price estimate.

p) demonstrate an understanding of the constructions of a synthetic call by identifying the breakeven stock price, the maximum profit, and the maximum loss.         q) Define the following terms: combination, spread, buying the spread (debit spread), selling the spread (credit spread), money (vertical or strike) spread, calendar (horizontal or time) spread      r) demonstrate an understanding of bull spreads by defining bull spreads, discussing the circumstances under which investors would use a bull spread strategy.         s) demonstrate an understanding of bear spreads by defining bear spreads, discussing the circumstances under which investors would use a bear spread strategy.        t) demonstrate an understanding of collars by defining collars, discussing the circumstances under which investors would use a collar strategy.

Question 1. Let St be the current price of a stock that pays no dividends.  a)Let rbid be the interest rate at which one can invest/lend money, and roff be theinterest rate at which one can borrow money, rbid≤roff. Both rates are continuously compounded. Using arbitrage arguments, find upper and lower bounds for the forwardprice of the stock for a forward contract with maturity T > t. b)How does your answer change if the stock itself has bid price St,bid and offer price St,off?