a.
To calculate: The value offered per share of Chicago Savings Corp.
Introduction:
Share Price:
The highest price of one share of a company that an investor is willing to pay is termed as the share price. It is current price used for the trading of such a share.
b.
To calculate: The percentage gain at the computed price in part (a) for Chicago Savings Corp.
Introduction:
A rate that shows the net profit or loss, an investor earns or loses on the investment over a particular time period is termed as the rate of return.
Percentage Gain:
It is the percentage that shows the net gain, an individual gain at the time of selling a product and it can be calculated by dividing the difference of the cost price and selling price from the original price (cost price). It is incurred when a product is sold at more than its cost price.
c.
To calculate: The percentage loss value after the cancellation of merger for Chicago Savings Corp.
Introduction:
Rate of return:
A rate that shows the net profit or loss that an investor earns or loses on the investment over a particular time period is termed as the rate of return.
Percentage Loss:
It is the percentage that shows the net loss that an individual loses at the time of selling a product and it can be calculated by dividing the difference of the cost price and selling price from the original price (cost price). It is incurred when a product is sold at less than its cost price.
d.
To calculate: The expected value of the return on Chicago Savings Corp.’s investment.
Introduction:
Expected value:
Also known as the mean, it is the value that is estimated or anticipated to be earned in the future from an investment. It is computed by adding up the values that are the result of multiplying each outcome from the probability.
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Loose Leaf for Foundations of Financial Management Format: Loose-leaf
- 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…arrow_forwardTwo investors are evaluating General Electric’s stock for possible purchase. They agree on the expected value of D1, and also on the expected future dividend growth rate. Further, they agree on the risk of the stock. However, one investor normally holds stocks for 2 years and the other normally holds stocks for 10 years. On the basis of the type of analysis done in this chapter, they should both be willing to pay the same price for General Electric’s stock. True or false? Explain.arrow_forwardYou took a long position in a call option on DBS’s share. The option premium is $7 per contract and the option has an exercise price of $25. DBS’s share is currently trading at $30. (d) Construct a payoff function to graphically illustrate your profit level when DBS’s share is $20, $30 and $40, and indicating the share price for you to breakeven for this long position. (e) What must the share price be for the option to be at the money?arrow_forward
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- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning