answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Mila [183]
2 years ago
6

You short 200 contracts of a call option on Stock XYZ. The contract multiplier is 100, i.e. each contract is on 100 shares of th

e stock.
In addition, you hold the following positions as of the end of previous trading day: 15,559 shares of the underlying stock; and $809,608 in debt.
The XYZ stock price is $51 right now. The risk-free interest rate is 4% per year. There are 252 trading days in a year.
Using the Black-Scholes model, you establish that the total delta of your option position is
-13,495
You adjust your hedge to bring your shareholding to match the new option delta. Which of the following is correct for your DEBT account, after you make the necessary adjustments?
a. $809,608 - (15,559 – 13,495)*51 = 704,344
b. $809,608e(0.04*1/252) + (15,559 – 13,495)*51 = 915,000
c. $809,608e(0.04*1/252) – (15,559 – 13,495)*51 = 703,932
d. $809,608 + (15,559 – 13,495)*51 = 914,872
Business
1 answer:
Verdich [7]2 years ago
7 0

Answer:

c. $809,608e(0.01*1/252) - (15,559 - 13,495) *51 = 703,932

Explanation:

Black Scholes Model is a mathematical model for pricing a contract of an option. It is best suited for dynamic financial market. The model determines the price of an option contract after incorporating the effects of volatility. In the given scenario there are 200 contracts of a call option. The trading days are 252 in the year and risk free interest rate is 4% prevailing in the market.

You might be interested in
When an organization’s internal environment no longer allows the organization to perform effectively, a manager might do which o
Drupady [299]

<u><em>Explanation</em></u>:

<u>Question 1.</u> These options apply;

  • Create a culture of innovation by inviting and expecting employees to contribute new ideas.
  • Hire people with new skills and perspectives and train current employees on new skills.
  • Restructure the organization to be more customer-centric and make work processes more efficient.

<u>Question 2.</u> These options apply;

  • Think about new possibilities for the organization.
  • Spend a good deal of time determining what the problem is and find out what caused it.
  • Create deadlines and checkpoints for solving the problem

<u>Question 3</u>

B. slow moving and stable

<u>Question 4</u>

D. incremental

<u>Question 5. </u>

D. made a proactive change

7 0
2 years ago
Albert transfers land (basis of $140,000 and fair market value of $320,000) to Gold Corporation for 80% of its stock and a note
-Dominant- [34]

Answer:

1. Albert has a recognized gain on the transfer of $140,000.

Explanation:

Option D is wrong because Gold corporation has a basis in the land of Albert's recognized gain plus the cost of the value of land's Albert. Therefore, $140,000 + $140,000 = $280,000.

Option A is correct because, under the recognized gain clause 357(C), the mortgage on the land exceeds the cost of value of the land by $(200,000 - $140,000) = $60,000. Moreover, Alberta has received $80,000 additional from notes payable. So, total recognized gain on the transfer = $80,000 + $60,000 = $140,000.

5 0
2 years ago
An investor buys a property for $608,000 with a 25-year mortgage and monthly payments at 8.10% APR. After 18 months the investor
vesna_86 [32]

Answer:

$71,520

Explanation:

we must first determine the monthly payment:

monthly payment = present value / annuity factor

  • present value = $608,000
  • PV annuity factor, 0.675%, 300 periods = 128.46

monthly payment = $608,000 / 128.46 = $4,732.99

Then I prepared an amortization schedule using an excel spreadsheet. After the 18th payment, the principal balance is $596,005.

The investor will have $667,525 - $596,005 = $71,520

Download pdf
6 0
2 years ago
Effective managers know how to combine both the art and science of management to address the broad range of issues they encounte
Arte-miy333 [17]

Answer:

Senior Manager.

Explanation:

The Senior manager has a substantial role in the company as they formulate objectives and policies of the organization. Manager's intuition, experience, instincts, and personal experience is needed to approach specific problems in a rational, logical and systematic way.

Senior managers have a responsibility towards the company ensuring that targets can be met and the company stays profitable. That is why they need to have a wide variety of skills to perform their jobs successfully.

5 0
2 years ago
(6) Erik receives an eight-year annuity-immediate with monthly payments. The first payment is $300 and payments increase by $6 e
Tamiku [17]

Answer:

  • <u>$70,264.03</u>

Explanation:

You need to calculate the value of 8 × 12 = 96 different cash flows.

There is not a formula to calculate that, because the<em> $6 dollar increase</em> does not represent growing with a constant rate.

The monthly payments are:

Month            payment ($)

0 (today)             300

1                           306

2                          312

3                          318

n                          306 + 6 (n-1)

96 (last)               876

Then you must create a spreadsheet with these features:

  • Five columns
  • First column is the month, and starts with month 0 (today)
  • Second column is the initial balance, the first balance is 0
  • Third column is the interest: it is calculated as the monthly interest by the initial balance. The monthly interest is 6%/12 = 0.06/12 = 0.005
  • Fourth column is the amount deposited: for month zero it is $300, and every month you add $6.
  • Fith column is the final balance: it is the sum of the initial balance (second column) + interest (third column) + deposit (fourth colum)
  • 96 rows: 8 years × 12months/year = 96 months.
  • The initial balance of each row is equal to the final balance of the previous row.

Here a sample of the first three rows:

Month  Initial balance  Interest                    Deposit     Final balance

 0                  0                   0                          300          300

 1                 300             300×0.005 = 1.5    306          607.5

 2                607.5          607.5×0.005           312          922.54

When you do it up to the row 96, the final balance is <em>the balance in the acccount at the end of the eight years</em>.

The last row of your spreadsheet will show:

96           69,042.81      345.21                    876         70,264.03

Thus, <em>the balance at the end of eight years will be $70,264.03</em>

7 0
2 years ago
Other questions:
  • If the distribution of water is a natural monopoly, then (i) multiple firms would likely each have to pay large fixed costs to d
    6·1 answer
  • Kimberly works for a well known financial company as a sales representative. She earns a small base salary but receives commissi
    6·1 answer
  • Power Drive Corporation designs and produces a line of golf equipment and golf apparel. Power Drive has 100,000 shares of common
    9·2 answers
  • Burberry's global marketing strategy of offering "affordable luxury" to customers in the United States, with a value proposition
    7·1 answer
  • Filter Corp. maintains a debt-equity ratio of .45. The cost of equity is 14.7 percent, the pretax cost of debt is 8.1 percent, a
    5·1 answer
  • Which of the following does not describe​ derivatives? A. These financial instruments are often used to speculate. B. Insurance
    15·1 answer
  • Winn Corp. currently sells 9,820 motor homes per year at $45,500 each, and 3,680 luxury motor coaches per year at $89,700 each.
    9·2 answers
  • You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF
    12·1 answer
  • A North Face retail store in Chicago sells 500 jackets each month. Each jacket costs the store $100 and the company has an annua
    9·1 answer
  • Marcus volunteers for an organization that cleans up
    12·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!