Premium Essay

Investing Assignment 6

In: Business and Management

Submitted By stefa1104
Words 754
Pages 4
Problems M06

Case Problem P14.2

(a)
I reckon that the benefit of using the put as a hedge device is that he will be able to sell the stock at 75 per share in the next three months. The market price of the stock does not matter. This guarantees a minimum return to Luck by using the put option. If the market price of the stock remains at 75 or above, the put option will not be utilized and the premium paid on the put option will go waste.
(b)
Luck's minimum profit assuming option is exercised:
Selling Price per share: 75
Less purchase cost per share: 40
Less option premium per share: 5.5
Net profit per share: 75 - 45.5 or 29.5 per share
Total profit: $8,850

If he did not purchase options and sell the stock immediately at 75, he would make 35 dollars per share (75 - 40 dollars) or $10,500 of total profit.

(c)
With a stock that drops to 50 per share, he will exercise the option and sell the stock at 75 dollars per share to make a total of 8,850.
With a stock that increases up to 100, he will let the options expire and sell the stock directly in the market at 100 per share to make a total profit of:
$100 - $40 purchase price and $5.5 options premium or 100 - 45.5 or 54.5 per share profit or total of $16,350 in profits.

(d)
I reckon that his best option is to use put as an hedge to lock in minimum profits from the transaction. We have to analyze this situation/option in a scenario where market conditions are volatile and the investor is less optimistic about the future of the stock and the potentiality of the market. Conversely, he could avoid using put as an hedge if he believes in the potential of the stock and the current market.

Problem P 15.2

Computation of the Market value of the contract
Market value of contract = Price X quantity

Price 88.8
Quantity 50,000
The price quote of 88.8 implies 88.8 cents per pound.
The...

Similar Documents

Premium Essay

How Information Technology Changed Investing

...Research Paper Your name: Chris Woolford Your Capella email address: cwoolford@capellauniversity.edu The course number: BUS3004 Instructor name: Richard Sands Date submitted: 07/15/2012 Title of your paper: How information technology changed investing Introduction Let’s discuss Information technology and how it has changed the way we invest in today’s society. The New Era of technology shapes everything that we do within the financial world. Modern technology has changed the way investing has been done in previous years by providing the market easier access, which appears to be faster and inexpensive. With that being said it has allowed money managers to have access to unlimited information at their fingertips. Information technology also has its down falls when it comes down to investing due to security issues. In today’s society you have people who have the knowledge to gain access to your investments and pilferage from your investments. There are many different ways how someone can gain access to your investments and how to prevent it from happening to you. How information technology changed investing Information technology has been the biggest breakthrough in investments it has opened a whole new world for investors. This world has opened up the stock exchange to become open 24 hours a day and 7 days a week and 365 day a year and investors can have access to it at any place in the world via computer or smart phone Apps. As you are reading this,......

Words: 1812 - Pages: 8

Premium Essay

Organization

...CHAPTER 2 – Solutions to Assignment Problems Assignment 2.1: a. b. Net profit margin = net income/net sales = 118,290/452,510 = 26.14% c. Accumulated depreciation = 212,820 + 12,510 = $225,330. Assignment 2.2: a. b. Assume for this problem that the number given for Net income is actually Net income available to common stockholders (that is, reported Net income minus preferred dividends). Thus, Annual addition to Retained earnings = Net income available to common stockholders – Common stock dividends paid. Thus, Common stock dividends paid = Net income – Addition to (i.e., change in) Retained earnings. Common stock dividends paid = 25,400 – (89,280 – 79,880) = 16,000. Dividends per share = Dividends divided by number of shares outstanding. Number of shares outstanding = Common Stock divided by par value per share = 60,000/.20 = 300,000. Dividends per share = $0.053 or 5.3 cents per share. c. Cash spent on new plant and equipment = Depreciation for the year as listed on the income statement plus the change in net fixed assets. Thus, Cash spent on fixed assets in 1999 = 10,260 + (202,640 – 184660) = $28,240. Assignment 2.3: 1. $4,055,740 $4,100,144 Although Gross sales decreased by 2 percent, net sales (the only number reported) show an increase of 1.1 percent. Since Returns and allowances are estimates made by management, there is some chance that the growth in sales conclusion may be misleading. 2. Cost of......

Words: 1450 - Pages: 6

Premium Essay

Cases Questions

...accordance with the syllabus or other instructions. Table of Contents Page Case: Name and Number, Bruner 5e Note Number I. C12- Best Practices—WACC No Questions II. C2- Bill Miller & Value Trust 2 III. C5- Financial Detective, 2005 Contained in Case IV. C7- Body Shop Intl* Contained in Case, but see page 3 V. C6- Krispy Kreme Doughnuts, Inc. 4 VI. C17- The Investment Detective* Contained in Case VII. C28- Intro. to Debt Policy & Value* No Questions, but review M & M Theory on debt and value of the firm. VIII. HBS Case- “Leveraged Betas and the Cost of Equity No Questions IX. C16- The Boeing 7E 7* 5 X. C26- Jet Blue Airways, IPO Valuation* 6 XI.a C35- Merton Electronics 7 XI.b C36- Carefour S. A.* 8 XI.c C44- Palamon Capital Partners* 9 XII. GM Dividend Policy Negotiation (Information to be provided by Dr. Kiss) * Note: Excel Spreadsheets containing some of the exhibits from the case are available for this case at www.mhhe.com/bruner5e FIN 620, CASE QUESTIONS DR. KISS Please allow these questions to serve as a guide when you prepare your case write-up in accordance with the syllabus or other instructions Case 2- Bill Miller & Value Trust Suggested Questions for Your Preparation of the Case. 1. How well has Value Trust performed in recent years? In making that assessment, what benchmark(s) are you using? How do......

Words: 1437 - Pages: 6

Free Essay

Social Impact Investing

...Individual Briefing Paper “The Impact Investing: a tool to mobilize Italian capitals in order to pursue a positive social impact” #2430 Social Entrepreneurship Individual Assignment Table of Contents Introduction ................................................................................. 3 1. The Problem ........................................................................... 3 1.1. Who Would Benefit And How? ............................................................. 4 1.2. The Threats .......................................................................................... 4 1.3. The Solution ......................................................................................... 5 1.4. Social Responsibility to Offset Lower Financial Returns......................... 5 2. The Topic: the Impact Investing ............................................... 6 3. Benchmarking ......................................................................... 6 4. Conclusions ............................................................................ 7 Sources ......................................................................................... 8 2 Social Entrepreneurship Individual Assignment Introduction The social offer is largely garrisoned by the State and, it involves sanitary sector, education, and services to the person and in......

Words: 3407 - Pages: 14

Premium Essay

Chapter 13 Statement of Cash Flow Exercises

...CASES, AND INTERNET ASSIGNMENT Exercises 13–1 13–2 13–3 13–4 13–5 13–6 13–7 13–8 *13–9 *13–10 13–11 Problems 13–1 13–2 13–3 13–4 13–5 13–6 13–7 *13–8 Topic Using a cash flow statement Using a cash flow statement Using noncash accounts to compute cash flows Relationship between accrual and cash flows Accrual versus cash flows Investing activities and interest revenue Format of a cash flow statement Cash effects of business strategies Indirect method Indirect method Annual report Learning Objectives 1, 2 1, 2, 6 4 3, 6 3 3, 4 2 8 6, 7 7 1, 2, 4 Characteristics Analytical Analytical Conceptual, mechanical, communication Conceptual, mechanical Conceptual, mechanical Conceptual, mechanical Conceptual, mechanical Analytical, communication Conceptual, communication Conceptual, mechanical Analytical, real—Tootsie Roll *13–9 Classification of cash flows Preparing a statement of cash flows— direct method (short) Investing activities (Problem 13–4 is an alternate.) Investing activities (Problem 13–3 is an alternate.) Cash flow from operating activities— direct method Cash flow from operating activities— indirect method Preparing a statement of cash flows— direct method; comprehensive Preparing a worksheet and statement of cash flows; evaluate the company’s liquidity—indirect method. (Problem 13–9 reverses the trend.) Preparing a worksheet and statement of cash flows; evaluate the company’s financial position—indirect method. 2 2, 3, 4 4 4 3 6, 7 2, 3, 4, 6, 8 1–9 Conceptual...

Words: 13189 - Pages: 53

Premium Essay

Acct 550 Week 3 Homework Assignment

...ACCT 550 Week 3 Homework Assignment To Buy This material Click below link http://www.uoptutors.com/acct-550/acct-550-week-3-homework-assignment E5-2 (Classification of Balance Sheet Accounts) Presented below are the captions of Faulk Company’s balance sheet. (a) Current assets. (b) Investments. (c) Property, plant, and equipment. (d) Intangible assets. (e) Other assets. (f) Current liabilities. (g) Noncurrent liabilities. (h) Capital stock. (i) Additional paid-in capital. (j) Retained earnings. E5-4 (Preparation of a Classified Balance Sheet) Assume that Denis Savard Inc. has the following accounts at the end of the current year. 1. Common Stock. 2. Discount on Bonds Payable. 3. Treasury Stock (at cost). 4. Notes Payable (short-term). 5. Raw Materials. 6. Preferred Stock Investments (long-term). 7. Unearned Rent Revenue. 8. Work in Process. 9. Copyrights. 10. Buildings. 11. Notes Receivable (short-term). 12. Cash. 13. Salaries and Wages Payable. 14. Accumulated Depreciation—Buildings. 15. Restricted Cash for Plant Expansion. 16. Land Held for Future Plant Site. 17. Allowance for Doubtful Accounts. 18. Retained Earnings. 19. Paid-in Capital in Excess of Par—Common Stock. 20. Unearned Subscriptions Revenue. 21. Receivables—Officers (due in one year). 22. Iventory (finished goods). 23. Accounts Receivable. 24.    Bonds Payable (due in 4 years). 25. Noncontrolling Interest. Instructions. Prepare a classified balance sheet in good form. (No......

Words: 324 - Pages: 2

Premium Essay

Case Study 1

...Organisational Finance Assignment -1 (Case Study – Time Value of Money) FINC 20006 – Organisational Finance Term 1, 2015 Prepared and Submitted by Mahesh Bhatia | S0265802 | Ravi Kumar | | | | Tutor: Mrs. Kate Wyllie Due Date: 30-Apr-2015 Date Submitted: - -Apr-2015 Question 1 The value of $10,000 handout given by the government will grow to an amount of $32,071.35 in a period of 20 years when the workers will reach their age of 64 years. P (1+r)^n 10,000 (1+0.06)^20 32,071.45 Question 2 10,000 (1+0.12)^20 96,462.93 As the rate of return increases, the future value of the “handout” would increase. Question 3 A savings account as outlined in question 1 is opened by fixed salaried persons who want to earn fixed interest income on their salary savings. There are quite a lot of advantages of opening a savings account as follows: * It encourages saving habits among the fixed salaried persons. * http://www.itsallaboutmoney.com/did-you-know/why-to-open-a-savings-account/ * There is certainty to the investors as to what amount of money would be available in the account at a specified date in the future. * Account holders can preserve the money in savings accounts for emergencies because saving accounts avoid the market fluctuations that are a feature of other investments such as stocks and shares. On the contrast, saving accounts offer some disadvantages as well: * The interest rate earned on savings accounts is lower than......

Words: 943 - Pages: 4

Premium Essay

Stock Anlysis

...Date: July 12th, 2011 Student Name: Eleanor Luu Instruction Name: Professor Stephen Itnyre Course/Class: ACC115003VA016-16-001 Assignment 1: Stock Analysis This Stock Analysis assignment shows six (6) differences Stock companies: APPL (NASDAQ), NIKE (NYSE), SAP (NYSE), MSFT (NYSE), INTU (NASDAQ), and SGPYY (LSE) in daily historical price from 3/1/11 through 5/31/11. 1 - The summary various accounting systems that each firm provides: ➢ Peachtree is a Sage product that and use by SGPYY, MSFT, and SAP AG ➢ QuickBook is an Intuit product that use by APPL, NIKE, and INTU QuickBooks holds 89 percent of the small business accounting software market in the United States. However, Sage’s small business product, Peachtree, is another popular product that has always given QuickBooks a run for its money. They both have their strengths and weaknesses. Here are the key comparisons from a general standpoint. ❖ Peachtree • It offers a tight integration between desktop accounting and online store. • It’s the best choice for Web-minded small businesses. • Stronger inventory management • Job costing capabilities • Over 140 customizable reports • Work flow management • Scalability/multi-user performance • Through GAP checks for duplicates and suspicious activity • Can accommodate up to 40 users, 10 more than QB • Easy to navigate. • Installation and Configuration...

Words: 953 - Pages: 4

Premium Essay

Fina 411

...CONCORDIA UNIVERSITY John Molson School of Business - Department of Finance Portfolio Management - FINA 411/2/A, C Course Outline – Fall 2014 Instructor: Dr. Abraham I. Brodt Office: MB 12.215 Tel: 848-2424-2997 Fax: 848-4500 E-mail: ABrodt@jmsb.concordia.ca [SUBJECT: FINA 411 …….] Classes: FINA 411/2A Mondays 11:45 - 14:30 [MB1.437] FINA 411/2C Wednesdays 11:45 - 14:30 [MB5.255] Office Hours: Mondays and Wednesdays 15:30 -- 16:30 [Please e-mail me first to confirm] and by appointment COURSE DESCRIPTION: This course focuses on modern investment theory and its application to the management of entire portfolios. It will consist of lectures, discussions of cases and articles, and video presentations. Topics include: a) construction of optimal asset portfolios using techniques such as the single index model, b) extensions of the capital asset pricing model: theory and tests; example, the zero-beta model, c) criteria for evaluation of investment performance, d) active vs. passive portfolio management, e) investment strategies. The Formula Growth Investment Centre Lab will be used to demonstrate the use of specialized investment software. Computer exercises are assigned to illustrate the application of the theory. Prerequisites: FINA 380 or 385; FINA 390 or 395. LEARNING OBJECTIVES To understand the theory and practice of Portfolio Management for Individuals and Institutions, e.g. Endowments, Mutual Funds, Pension Plans, etc. ...

Words: 1579 - Pages: 7

Premium Essay

Al-Mihaniya Company

...The Lancaster MBA Assignment First Page Student ID number(s): Student Name(s): Nabil Kilany – 30675912 Khalil Elias – 30983977 Riyad Kurdi – 31082936 Ramzi Shokeh – 31007941 Laith Adas – 31007784 Nabil Al-Kilany Khalil Elias Riyad Kurdi Ramzi Shokeh Laith Adas Module Name: GMBA 558 - Strategy Module Tutor: Dr. Martin Friesl Essay/Project Title Professional Company for Real-estate Investment and Housing Strategy Project Word Count: (5430 excluding Cover, Contents, reference list & appendices ) Assignment Due Date: 15-Nov-2013 By submitting this coursework for assessment, I/We acknowledge the following: Academic Integrity I/We have read and understood the Lancaster University Postgraduate Regulations (http://www.lancs.ac.uk/celt/celtweb/marp) on cheating and plagiarism and state that the work I submit will be my/our own and will not contain any unacknowledged work from other sources. As the author(s) of submitted work in my/our name I/we am/are prepared to undertake a fair and reasonable oral examination of its contents. Research Ethics and Governance I/We have read and understood the Lancaster University Research Ethics and Governance code of practice. Note: This form is to be used as the first page for all coursework submissions. 1|Page GMBA558 Group Assignment The Lancaster MBA Table of Contents EXECUTIVE SUMMARY ..................................................................................

Words: 18629 - Pages: 75

Premium Essay

Portfolio Adjustment Assignment

...Curtin Business School Department of Finance and Banking Portfolio Management 301 Semester 1, 2013 - Assignment Instructions 1. This is a group assignment. Each group will consist of three students and each group will submit one joint report. 2. In doing this assignment, you are encouraged to refer to the lecture notes, text, the reading material in Blackboard and any other material that may assist you in understanding what you are doing in this assignment. Group members are expected to actively discuss and work among themselves but not refer to the work of any other groups. Any collusion of this form will be treated very seriously and penalised. 3. Please ensure that each member in a group makes an equal contribution to the assignment, as far as possible. Free riders should be reported to me and may be penalised. 4. You are expected to make this assignment an opportunity to develop you spreadsheet computational skills. Make use of Excel to do your calculations and charts/graphs. 5. Assignments must be presented in a professional and reader-friendly manner. The key results or summaries of your calculation and your comments must be shown in the body of the report. Make sure the formulas or methods used for your computations are clearly shown. The data collected and details of calculations can be shown as appendices to the report. The length of the report should not exceed 10 pages (Excluding the appendices). You should also follow the following......

Words: 1087 - Pages: 5

Premium Essay

Assignment Web or Mobile System Paper

...Assignment Web or Mobile System paper page 1 Assignment Web or Mobile System paper Amanda Bartlett IT/205 February/15/2015 Juan Vega Assignment Web or Mobile System paper page 2 Facebook: A social network engine The Internet was designed to be a place where content such as thoughts, pictures and videos can be easily shared between different people. The people that one shares with are often members of social networks, such as friends, family or peers in a organization. This sharing has taken place on many systems such as bulletin board systems (BBS), image boards, forums and blogs. But none of these social systems have had the marketing success, as Facebook. How Facebook works To use Facebook a person, group, or corporation registers an account and then specifies some basic profile information. Then the user can post status updates, upload videos and pictures, or “check-in” by posting their location. In addition to their basic profile information, the user will also specify the social circles. Examples of social circles might be people that worked at Contoso, live in Seattle, or are friends of Bob. Though the use of these declared social circles. Facebook then finds content that the user’s “friends” have published. This content is dynamically presented as a personalized view (Bosworth & cox, 2006). When selecting which content to show; the frequency is based on the affinity of the friend’s......

Words: 1251 - Pages: 6

Premium Essay

Mena Case

...academic assignment, or copied or colluded with a fellow student in an effort to improve my grade. * Fabricated Falsified, invented, or misstated any data, information, or citation in an academic assignment, field experience, academic credentials, job application, or placement file. * Plagiarized Used the works (i.e. words, images, other materials) of another person as my own words without proper citation in any academic assignment, including submission (in whole or in part) of any work purchased or downloaded from a Web site or an Internet paper clearinghouse. Additionally, works I have produced for prior classes have been properly cited and not represented (in whole or in part) as new work produced for this assignment. * Facilitated Academic Dishonesty Assisted or attempted to assist any person to commit any act of academic misconduct, such as allowing someone to copy a paper or test answers. Additionally, I certify that I have been informed of the resources provided by the university to teach students about academic honesty, including the Online Writing Center and Webster’s plagiarism tutorials. I understand that it is my responsibility to learn and apply the principles of academic honesty, and cannot argue ignorance should I be caught violating the Academic Honesty Policy. I understand that, should I violate the Academic Honesty Policy, I must submit to the consequences determined by the instructor, which may include failure of the assignment or......

Words: 2269 - Pages: 10

Premium Essay

Fiannce

...School of Accountancy 115.102 Accounting Assignment 1 Semester 1, 2015 <www-accountancy.massey.ac.nz Assignment 1 Instructions How to Approach this Assignment * Please read all instructions before starting the assignment. * To complete the assignment you need access to a computer and a word processing package. * You should first study the relevant material in the text and make sure you understand the concepts covered. * Contact a member of the 115.102 Team if you have any problems submitting the assignment on Stream. Backups Make certain you keep backups of your work. Once you have started working on the assignment you should make backups. It pays to rename different versions of your work. A simple way to do this is to use the Save as file instruction and add a number or letter to the end of the file name. (This allows you to go back to an earlier version.) However, when you upload the file, make sure that the file you upload follows the naming convention outlined below. Submission of the Assignment (Uploading your file to Stream) To access the submission points you must have completed the Honesty Declaration Quiz. The submission point for Assignment 1 is under “Activities which are Assessed” Use the following naming convention for the files that you are submitting: use your Last Name Student ID number as the name of the file [Do not change the file extension or you (and......

Words: 1977 - Pages: 8

Premium Essay

Acc 421 Mart Pride in Excellence/Acc421Martdotcom

...Martinez Corporation engaged in the following cash transactions during 2014. Q-4 The major classifications of activities reported in the statement of cash flows are operating, investing, and financing. Classify each of the transactions listed below as: Q-5 E5-14 http://edugen.wiley.com/edugen/art2/common/pixel.gif The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of the year 2014 are as follows. Exercise 5-16 (Part Level Submission) A comparative balance sheet for Shabbona Corporation is presented below. Exercise 5-18 (Part Level Submission) The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2014 appear below. IFRS Practice Question 3 Companies that use IFRS: Entry field with correct answer A company has purchased a tract of land and expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. Under IFRS, the land should be reported as: -------------------------------------------------------------------------------------- ACC 421 Chapter 23 wileyplus FOR MORE CLASSES VISIT www.acc421mart.com Exercise 23-11 Condensed financial data of Pat Metheny Company for 2014 and 2013 are presented below Problem 23-6 Comparative balance sheet accounts of Marcus Inc. are presented below. IFRS Multiple Choice Question 06...

Words: 1095 - Pages: 5