Answer:
a) $8
b) $4
c) Decrease
Explanation:
Background.
A call option as you probably know, is an agreement to buy an asset on or before a particular day at a price already determined in the agreement.
a) the Intrinsic value of the option is the market price minus the strike price.
Intrinsic Value = Market Price - Strike price
= $43 - $35
= $8 per share.
It is worthy of note that for an option, of the intrinsic value dips into negative figures it is just said to be 0.
b) To calculate the time value, we subtract the intrinsic value from the call premium
= Call Premium - Intrinsic value
= $12 - $8
= $4
c) The call option has 6 months to maturity and the dividends are to come in 3 months. Share prices usually drop after a dividend has been paid so because the call option matures in 6 months, the price of the call option will DECREASE owing to the Expected drop in stock price.
Answer:
A. standard deviation = $500, expected return = $5,000
Explanation:
For analysis which investment involved the least amount of risk we need to determine the coefficient of variation i.e. shown below:
As we know that
Coefficient of variance = standard deviation ÷ expected return
A = $500 ÷ $5,000 = 0.10
B = $700 ÷ $500 = 1.40
C = $900 ÷ $800 = 1.125
D = $400 ÷ 350 = 1.143
As it can be seen that investment A has the leas amount of risk hence, the same is to be considered
Answer:
6) H0: μ≥ 7.4 versus H1: μ< 7.4
7) - 1.28
8) - 1.50
Answer:
1
Explanation:
A perfect competition is characterized by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.
In the long run, firms earn zero economic profit. If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.
Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.
In a perfect monopoly, there is only one firm operating in the industry
In a monopolistic competition, differentiated products are sold
In an oligopoly, there are few large firms
Answer:
$44
Explanation:
Data provided in the question:
Dividend on Spirex Corporation's common stock = $4.00
Expected growth rate, g = 10%
Required rate of return, r = 20%
Now,
Price willing to pay = 
here,
D1 = dividend at end of year
or
D1 = $4 × (1 + r )
or
D1 = $4 × ( 1 + 0.1 )
or
D1 = $4.4
Thus,
Price willing to pay = 
or
Price willing to pay = $44
