You purchase on 50% margin, 150 shares of a stock with the following quotes: Bid Ask $24.00 $22 The maintenance margin set by your broker is 30%. Use this information to answer the question below. Let us say that the information above remains true, except that the security price changes as follows: Bid: $16, and Ask: $17. To satisfy the margin call, you could deposit an additional, in cash: O 120 O 84 Ⓒ264 O None of the above
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- he initial margin requirement on a stock purchase is 50% and the maintenance margin is 30%. You fully use the margin allowed to purchase 100 shares of XYZ at $25. If the price drop to the margin-call point, your broker will sell just enough of your shares to restore the initial margin requirement. How many shares will your broker sell Ignore interest on the loan.) Multiple Choice 334 400 462 667You purchase a call with a strike of K-22 at a premium of 1.73 and you purchase a put with a strike of K-22 at a premium of 2.13. At maturity, the underlying is worth 15.31. What is your profit (or loss)? {Enter your answer in dollars with 2 decimals, but do not use the "$". Enter a loss with a negative sign. For example, if the profit/loss is -123.45, enter-123.45 with the negative sign for your answer. }You are bearish on Telecom and decide to sell short 100 shares at the current market price of $50 per share.a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position?The Initial Margin is $ Blank 1. Fill in the blank, read surrounding text.Please use only accepted characters within numeric response fields..b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position?A margin call will be issued when price is $ Blank 2. Fill in the blank, read surrounding text.or higher.
- An investor purchases a long call at a price of $3.06. The strike price is $21. If the current stock price is $26.02, what is the break-even price for the investor? (Round answer to 2 decimal places. Do not round intermediate calculations)A stock currently trades at $100. In one month its price will either be $125, $100, or $75. 1 sell you a call option on this stock, struck at $95, for $11. | hedge my exposure by purchasing A shares, borrowing 1004 - 11 in order to fund the purchase. The simple rate of interest is 12%. (@) What will my profit/loss be in one month? {b) Is it possible for me to completely hedge my exposure? Explain.You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $102 at year-end. XYZ currently sells for $102. Over the next year, the stock price will increase by 7% or decrease by 7%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. Suppose the desired put option were traded. How much would it cost to purchase? b. What would have been the cost of the protective put portfolio? c. What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with X=102? Show that the payoff to this portfolio and the cost of establishing the portfolio match those of the desired protective put. Complete this question by entering your answers in the tabs below. Required A Required B Required C What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with…
- You are a trader in IBM options for an investment bank. Your position is long 100 of the Jan 200 calls and that option has the following greeks: delta = .35, gamma = 0, vega = $1.68 IBM stock is currently at $195. a) (1) if you wanted to hedge the vega risk of the position, which of the following trades would help to accomplish that goal? i) ii) iii) iv) buy 1680 shares of IBM stock sell any IBM options that totaled $1.68 of vega c. sell 1680 shares of IBM stock sell an IBM option with .35 delta none of the aboveNo Arbitrage1. Consider the following three securities: SNOW, RAIN and SUN. SNOWpays $100 if it snows on NYU graduation day. RAIN pays $100 if it rains, but doesn’tsnow on NYU graduation day. SUN pays $100 if there is neither rain nor snow ongraduation day. Suppose that SNOW is currently trading at $1, RAIN is currentlytrading at $41 and SUN is trading at a price of $52.(a) If you buy 1 share of SNOW, 1 share of RAIN and 1 share of SUN, what is thepayoff you guarantee on NYU graduation day?(b) According to the No Arbitrage Condition, what must be the price of a $100 facevalue zero-coupon bond that matures on NYU graduation day?(c) Suppose that this zero-coupon bond is trading at $90. How would you set up atransaction to earn a riskless arbitrage profit? Assume no trading costs.(d) Suppose that trading zero-coupon bonds and RAIN is costless, but shorting SUNcosts $3 per $100 face value and shorting SNOW costs $1 per $100 face value.Can you still make an arbitrage profit?Suppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot diagrams for a forward contract on XYZ stock with a forward price of $55. (b) Is there any advantage to investing in the stock or the forward contract? Why? (c) Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?
- An investor owns Citibank stock at $75. They want to sell some 3-month out- of-the-money call options against their position. STRIKES 72.50 75 77.50 CALL PRICE 5.60 4.12 2.84 Create a table showing the profit and loss for underlying trading at 70, 72.5, 75, 77.5, 80 and 82.5 for all the positions and the option strategy. Draw an expiry pay-off diagram, using the prices in the table.Refer to the stock options on Microsoft in the Figure 2.10. Suppose you buy a November expiration call option on 100 shares with the excise price of $140. Required: a-1. If the stock price at option expiration is $144, will you exercise your call?a-2. What is the net profit/loss on your position? (Input the amount as a positive value.)a-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) b-1. Would you exercise the call if you had bought the November call with the exercise price $135?b-2. What is the net profit/loss on your position? (Input the amount as a positive value.)b-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)c-1. What if you had bought the November put with exercise price $140 instead? Would you exercise the put at a stock price of $140?c-2. What is the rate of return on your position? (Negative…Astock currently trades at $100. In one month its price will either be $125, $100, or $75. 1 sell you a call option on this stock, struck at $95, for $11. | hedge my exposure by purchasing A shares, borrowing 1004 - 11 in order to fund the purchase. The simple rate of interest is 12%. (2) What will my profit/loss be in one month? {b) Is it possible for me to completely hedge my exposure? Explain.