The call has a premium of $10 and a strike price of $60. You decide to go on margin, meaning that you put down $8 of your own money and borrow the other $2. On the day of expiration, the underlying asset is worth $75. What is your percentage return on equity for this position?

Q: Answer the following question and give the specific process: What is the value of a derivative that…

A: This is a Cash or Nothing call. The value is 100N(d2) e -0.08*0.5

Q: Suppose you enter into a short 6-month forward position at a forward price of $100. What is the…

A: Question 3.Forward price = $100Underlying price = $150Question 4.  Forward price = $50Underlying…

Q: given S0=€50, at the end of second months, the asset can be €52 or €48. With risk free interest rate…

A: To value American options, the binomial option pricing model employs an iterative technique that…

Q: 5. To invest capital, a person has the following options: a） Fixed-term investment with interest of…

A: Effective rate of return refers to the percentage of return from the investment with the effect of…

Q: You enter in a long position in a 6x12 FRA at a LIBOR rate of 3.00% and a nominal value of $10M. (a)…

A: Solution:-The scenario in question involves holding a long position in a Forward Rate Agreement…

Q: Consider an American Call option with a Strike of $100 and a term of 6 months at time 0. After 3…

A: An option contract allows its buyer to trade (buy/sell) the underlying in the future at a…

Q: Suppose you purchase 500 shares of Blue Acre, which currently trading at $60 per share. Suppose that…

A: Margin trading involves borrowing funds from a broker to purchase securities, such as stocks, bonds,…

Q: The price of Stock Y, which is currently $80, can go to $120, $90, or $60 in 6 months’ time.…

A: Assume that P1, P2, and P3 are the probabilities that the price of the stock increases upto $120,…

Q: Calculate the Forward Price of an asset with the following data points: • Current Spot Price: $58.75…

A: The price of an underlying asset on a future date is known as forward price. This is the price at…

Q: You invest $10,000 in a long position in a stock priced at $44 per share. Intial margin is 70% and…

A: A margin call is made by the broker to the investor asking them to deposit an extra amount in their…

Q: You plan to invest in securities that pay 15.0%, compounded annually. If you invest $2,000 today,…

A: The concept of time value of money will be used here. When an amount is invested today then it grows…

Q: At the beginning of the month, you owned $9,000 of General Dynamics, $6,000 of Starbucks, and $5,000…

A: Portfolio return means the weighted average profitability of the portfolio. In a portfolio, there…

Q: AMXL price is at 16.20, AMXL is expected to pay a dividend of 16 cents in 30 days and pay a dividend…

A: Forward price refers to the agreed-upon price at which a specific financial instrument, such as a…

Q: You are thinking of purchasing a cumulative, convertible preferred share with a stated dividend of…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: If the quotes for a T-bill with 90 days until maturity are 4.54 bid and 4.49 asked, at what price an…

A: The price of a bond can be determined using various factors such as its face value, coupon rate,…

Q: If the initial speculative margin of a futures contract is $2,000, the maintenance margin is $1,800…

A: Several trading accounts these days provide the facility of margin trading. It essentially means…

Q: You buy 6 call options with a contract size of AUD 30,000. They have a USD/AUD strike premium of…

A: Call option gives the opportunity to buy the currency on the expiration but there is no obligation…

Q: A one year call option contract of Office Pro sells for $2,200. In one year, the stock price will be…

A: A call option is a contract where the buyer has the right but not the obligation of purchasing the…

Q: An investor puts up $5,000 but borrows an equal amount of money from his broker to double the amount…

A: Solution:Investor’s rate of return means the percentage of net earnings to own invested funds.

Q: You write a put option contract at a premium of $1.55/option: you are short in the put. The options…

A: Solution:Selling a put option means obligation to buy the underlying asset at strike price on…

Q: Jobbar sold a put option on British pounds for €.035 per unit. The exercise price was €1.1370, and…

A: The options are the derivatives, which provide the right, but not the obligation to buy or sell the…

Q: You are long in a put option with an exercise price of $60. What is the value of the put at…

A: Given that the exercise price is $60:If the stock price at maturity is below $60, the put option is…

Q: Consider a put option written on an underlying security that has a current value of $100 and has a…

A: Vega is a measure of the sensitivity of the value of an option to changes in the volatility of the…

Q: suppose you buy an non-dividend paying asset at $50 and sell a 6 month futures contract at $53. What…

A: When there is an agreement between the two parties to trade the selected lot size of an asset at a…

Q: A trader enters into a long strangle for SGD/USD with a call strike price of 0.7034 and a put strike…

A: Long strangle: This option holder will buy a call option and a put option on a stock simultaneously…

Q: 1. Assume an investor purchased a six-month T-bill with a $10,000 par value for $9,800 and sold it…

A: Purchase price = $9,800Selling price = $9,850Days = 90 daysThe following formula will be used to…

Q: The following parameters are provided:S = $40, K= $45, r = 5% (continuously compounded), Time to…

A: Put Call parity is a concept that shows the relation between the Call price, Put price and the…

Q: Calculate the VaR (Value at Risk) of a position based on the following information: market value is…

A: Value at risk refers to the tool used for measuring the losses associated with the portfolio,…

Q: 1. An investeor buys a ratio spread of 1-year European calls. He buys 1 call option with strike…

A: Call option gives the buyer the right to buy the underlying at given price for a specified time…

Q: 1. If there is no arbitrage opportunity, find the price of a call option on this asset, with strike…

A: Given: Spot price = $100 Strike price = $95 Interest rate = 2% Expiration in 6 months.  For 6 months…

Q: What is the comparison (analysis) of the Days Sales Outstanding of Industry Average Ratio and the…

A: Days Sales Outstanding (DSO) is the number of days it would take for the company to collect its…

Q: Consider a forward contract that expires in 9 months. The underlying asset is worth $250 and the…

A: Underlying price (S) = $250 r = 8% n = 9 months = 0.75 years

Q: A stock costs $80 and pays a $2 annual dividend. If you expect to sell the stock after four years…

A: The required return on the stock represents the total return earned on the stock. This return is…

Q: An asset has a current price of $80 and it has an expected price of $95 in 6 months. In…

A: Value of a contracted asset prior to maturity-It is the value of the asset contacted to trade in the…

Q: Company RJay RJay Sell-Mart Xenon Time to Expiration (months) 1 2 5 6 Strike 60 70 60 7.50 SO 62.77…

A: A call option gives the right but not the obligation to buy at the strike price.We can determine the…

Q: 28. Consider a bank dealer who faces the following spot rates and interest rates. What should he set…

A: We are given the following:- Exchange rates on the spot:   - Bid: $1.42/€  - Ask: $1.45/€- Borrowing…

Q: Suppose that a party wanted to enter an FRA that expires in 121 days and is based on 55-day LIBOR.…

A: It is a case of a party taking a short position in the forward contract agreement. Here, the party…

Q: The balance sheet for Shankland Corporation follows: 000 009 $ 000 '006 Current assets Long-term…

A: Working capital = current assets - current liabilities

Q: Suppose the price of a stock is $85 and the continuously compounded interest rate is 6.25%. If the…

A: Dividend yield: The dividend yield is a financial measure that shows how much a firm pays out in…