Miss Liza, the CFO of Nice Biscuit Berhad (NBB) believes that all corporate securities have implicit or explicit option features and as a result, understanding securities that possess option features requires knowledge of the factors that determine an option's value. Miss Liza is also aware that the most familiar options are stock options. On 13th June 2024, Miss Liza buys call options on 50,000 units of Petronas Dagangan Berhad (PDB) shares with an exercise price of RM40 per unit. The value of the options is RM2 per unit and the termination date is on 30th June 2024. On 30th June 2024n the share price of PDB share is RM42. From the above information you are required to compute Miss Liza's gain or losses. Based on your computation, explain to Miss Liza about this situation.

Miss Liza, the CFO of Nice Biscuit Berhad (NBB) believes that all corporate securities have implicit or explicit option features and as a result, understanding securities that possess option features requires knowledge of the factors that determine an option's value. Miss Liza is also aware that the most familiar options are stock options. On 13th June 2024, Miss Liza buys call options on 50,000 units of Petronas Dagangan Berhad (PDB) shares with an exercise price of RM40 per unit. The value of the options is RM2 per unit and the termination date is on 30th June 2024. On 30th June 2024n the share price of PDB share is RM42. From the above information you are required to compute Miss Liza's gain or losses. Based on your computation, explain to Miss Liza about this situation.

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter16: Property Transactions: Capital Gains And Losses

Section: Chapter Questions

Problem 24P

See similar textbooks

Similar questions

En Zahir, the CFO of Cahaya Berhad believes that all corporate securities have implicit or explicit option features and as a result, understanding securities that possess option features requires knowledge of the factors that determine an option's value. En Zahir is also aware that the most familiar options are stock options. On 13th June 2024, En Zahir buys call options on 50,000 units of Jelantas Berhad shares with an exercise price of RM40 per unit. The value of the options is RM2 per unit and the termination date is on 30th June 2024. On 30th June 2024, the share price of Jelantas Berhad share is RM42. From the above information you are required to compute En Zahir's gain or losses. Based on your computation, explain to En Zahir about this situation.
Question 2 a. Miss Liza, the CFO of Nice Biscuit Berhad (NBB) believes that all corporate securities have implicit or explicit option features and as a result, understanding securities that possess option features requires knowledge of the factors that determine an option's value. Miss Liza is also aware that the most familiar options are stock options. On 13th June 2024, Miss Liza buys call options on 50,000 units of Petronas Dagangan Berhad (PDB) shares with an exercise price of RM40 per unit. The value of the options is RM2 per unit and the termination date is on 30th June 2024. On 30th June 2024n the share price of PDB share is RM42. From the above information you are required to compute Miss Liza's gain or losses. Based on your computation, explain to Miss Liza about this situation.
The treasurer of Sheridan Corp. has read on the Internet that the stock price of Ewing Inc. is about to take off. In order to profit from this potential development, Sheridan purchased a call option on Ewing common shares on July 7, 2020, for $460. The call option is for 240 shares (notional value), and the strike price is $65. The option expires on January 31, 2021. The following data are available with respect to the call option: Fair Value Market Price Date of Option of Ewing Shares Sept. 30, 2020 $1,740 $71 per share Dec. 31, 2020 $975 $68 per share Jan. 4, 2021 $1,550 $70 per share Prepare the journal entry for Sheridan for July 7, 2020: Invests in call option on Ewing shares.
The treasurer of Miller Co. has read on the Internet that the stock price of Wade Inc. is about to take off. In order to profit from this potential development, Miller Co. purchased a call option on Wade common shares on July 7, 2020, for $240. The call option is for 200 shares (notional value), and the strike price is $70. (The market price of a share of Wade stock on that date is $70.) The option expires on January 31, 2021. The following data are available with respect to the call option. Date Market Price of Wade Shares Time Value of Call Option September 30, 2020 $77 per share $180 December 31, 2020 75 per share 65 January 4, 2021 76 per share 30 Instructions Prepare the journal entries for Miller Co. for the following dates. a. July 7, 2020—Investment in call option on Wade shares. b. September 30, 2020—Miller prepares financial statements. c. December 31, 2020—Miller prepares financial statements. d. January 4, 2021—Miller settles the call…
If an investor were to sell 100 shares of Microsoft stock to another investor in the SECURITIES MARKET, this would be referred to as what type of transaction? - a future market transaction - a secondary market transaction -it is primary market transaction - a money mar
In the Republic of Atlantis the regulators decide to allow private placement of equity (see problem set 2 extra questions). A firm called Fish Inc. currently trades in their stock market at a price of $3 (Atlantic dollars) with 100 million shares outstanding. The manager currently needs to raise extra $300m. They decide to do that in a private placement and sell the shares to an individual investor at a discount of 20% of current share price. Which of the following statements is (are) true: (i) Private placements are fair. (ii) The company will issue 125m extra shares. (iii) Pre-existing investors will lose $34p per share.Required to answer. Single choice.
John Hill is a Sydney-based investor. He has been closely following his investment in 1,000 shares of Obrekete, an Italian firm that went public in June 2018. When he purchased his 1,000 shares at €80 per share, the euro was trading at AUD$2.5657 / €. Currently, the share is trading at €86 per share and the exchange rate is AUD$2.5563/ €. a. If John sells his shares today, what percentage change in the share price would he receive? b. What is the percentage change in the value of the euro versus the Australian dollar over this same period? c. What is the total return that John would earn on his shares if he sold them at €86 per share? d. If John waits to sell his shares when the price rises to €88 per share, what will be his returns? e. If the current spot exchange rate changes to AUD$2.4863 / €, what would be the total return on the Obrekete investment in Australian dollars if the price remains at €86 per share?
Mezzo was promoted as Finance Director of a Hong Kong listed company in April 2019. As a senior member of staff, she was given 1.5 million share options at an exercise price of $0.20 per share exercisable within two years from 1 April 2020. The shares were trading at $0.50 on that date. The share price of the company surged recently to $1.20 per share, at which time Mezzo exercised half of the options. Her stockbroker sold the shares at an average price of $1.00 per share. How much will be included as her assessable income in respect of the share options for the year of assessment 2020/21? Select one: a. $600,000 b. $750,000 c. $1,500,000 d. $450,000 Clear my choice
Amherst Corporation, an investment banking company, often has extra cash to invest. Suppose Amherst buys900 shares of Hurricane Corporation stock at $57 per share, representing less than 5% ofHurricane’s outstanding stock. Amherst expects to hold the Hurricane stock for one month andthen sell it. The purchase occurs on December 15, 2018. On December 31, the market price of ashare of Hurricane stock is $58 per share.Requirements1. What type of investment is this for Amherst? Give the reason for your answer.2. Record Amherst’s purchase of the Hurricane stock on December 15 and the adjustment tomarket value on December 31.3. Show how Amherst would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018.
Suppose that Tesla stock is currently selling at $270 per share. For each of the following situations (ignoring brokerage commissions), calculate the gain or loss that Olivia Crowe realizes if she makes a 100-share transaction. She sells short and repurchases the borrowed shares at $295 per share. She takes a long position and sells the stock at $295 per share. She sells short and repurchases the borrowed shares at $255 per share. She takes a long position and sells the stock at $255 per share.
Vinubhai
Which of the following is a primary market transaction? a. You sell 200 shares of IBM stock on the NYSE through your broker. b. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. c. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker--you just give him cash and he gives you the stock. d. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction. e. You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the NYSE.