You believe that oil prices will be rising more than expected, and that rising prices will result in lower earnings ta industrial companies that use a lot of petroleum-related products in their operations. You also believe that the effects on this sector will be magnified because consumer demand will fall as oil prices rise. You locate an exchange traded fund, QLT, that represents a basket of industrial companies. You don't want to short the ETF because you don't have enough margin in your account. QLT is currently trading at $32.19. You decide to buy a put option (for 100 shares) with a strike price of $33.50, priced at $2.29. What is your profit if you are wrong anc the price of XLB increases to $35.50 on the expiration date? (Click on the icon here in order to copy the contents of the data table below into a spreadsheet) QLT: Materials-$32.19 Calls $33.50 Strike Expiration Price Strike Expiration BES $31.00 November $1.26 $31.00 November November $1.26 Puts $33.50 November Price $2.58 $2,29 If you are wrong and the price of XLB increases to $35.50 on the expiration date, the profit S (Round to the
You believe that oil prices will be rising more than expected, and that rising prices will result in lower earnings ta industrial companies that use a lot of petroleum-related products in their operations. You also believe that the effects on this sector will be magnified because consumer demand will fall as oil prices rise. You locate an exchange traded fund, QLT, that represents a basket of industrial companies. You don't want to short the ETF because you don't have enough margin in your account. QLT is currently trading at $32.19. You decide to buy a put option (for 100 shares) with a strike price of $33.50, priced at $2.29. What is your profit if you are wrong anc the price of XLB increases to $35.50 on the expiration date? (Click on the icon here in order to copy the contents of the data table below into a spreadsheet) QLT: Materials-$32.19 Calls $33.50 Strike Expiration Price Strike Expiration BES $31.00 November $1.26 $31.00 November November $1.26 Puts $33.50 November Price $2.58 $2,29 If you are wrong and the price of XLB increases to $35.50 on the expiration date, the profit S (Round to the
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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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Transcribed Image Text:You believe that oil prices will be rising more than expected, and that nsing prices will result in lower earnings for
industrial companies that use a lot of petroleum-related products in their operations. You also believe that the
effects on this sector will be magnified because consumer demand will fall as oil prices rise. You locate an
exchange traded fund, QLT, that represents a basket of industrial companies. You don't want to short the ETF
because you don't have enough margin in your account. QLT is currently trading at $32.19. You decide to buy a
put option (for 100 shares) with a strike price of $33.50, priced at $2.29. What is your profit if you are wrong and
the price of XLB increases to $35.50 on the expiration date? (Click on the icon here in order to copy the
contents of the data table below into a spreadsheet)
QLT: Materials-$32.19
Strike
$31.00
$33.50
Calls
Expiration
Price
$1.26
November
November $1.26
Puts
Expiration
Price
November $2.58
$2,29
Strike
$31.00
$33.50 November
If you are wrong and the price of XLB increases to $35.50 on the expiration date, the profit S
nearest dollar. Enter a negative number for a loss.);
h
(Round to the
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