Finance

Solution Library


Profit or Loss to a Short Forward Position MCQ

Question The current price of a stock is $42. The stock does not pay dividends.  A 3-month forward contract on this stock is priced at $44. What is closest to the profit or loss to a SHORT forward position if the spot price of the stock rises to $45 on the expiration date? (a)  &nbs ... Read More

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Derivative Positions in Hedging a Stock MCQ

Question You have a SHORT position in XYZ stock.  You are worried about the possibility of this position losing money.  Which of the following derivative positions would be least helpful in hedging your short position in XYZ stock?  (a)        Long ... Read More

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Payoff from a Long Position in the Call Option MCQ

Question XYZ is a stock currently priced at $106 and does not pay a dividend.    Consider a one year call option with strike price $105.  What is closest to the payoff from a long position in the call option if the stock price rises to $109 in one year? (a)   &nb ... Read More

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Stock Value Closest to the Price of a One Year Call MCQ

Question XYZ is a stock currently priced at $100 that does not pay a dividend.   Assume further that the annual effective interest rate is 4% (i.e., $100 loaned today will return $104 one year from now), and that a 1-year put option with strike price $106 is priced at $8.  What is cl ... Read More

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Price of a One Year Forward Contract on Stock MCQ

Question XYZ stock is priced at $100. The continuously compounded dividend yield on the stock is 3%.  The continuously compounded interest rate is 5%.  Which is closest to the price of a 12-month forward contract on XYZ stock? (a)        $99 (b) & ... Read More

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Price of a One year Forward Contract on Stock MCQ

Question XYZ is a stock currently priced at $100.  It is anticipated that XYZ will pay a special dividend of $5.25 in 1 year.  Assume further that the annual effective interest rate is 5% (i.e., $100 loaned today will return $105 one year from now).  What is closest to the price of a ... Read More

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Graph PAYOFF function of Stock and to find Common Derivative

Question XYZ stock is currently trading at $100.  The one-year effective interest rate is 5% ($1 lent today yields $1.05 one year from now).  A one year put with strike price $105 is priced at $5. Suppose you buy one put for $5, buy one share for $100, and borrow $100. Graph the PAYOFF ... Read More

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Calculation of Forward Price of a Stock that Pays no Dividend

Question Consider a stock that pays no dividend trading at $100.  Suppose one-year call options with strike prices of $95, $100, $105, and $110 can be bought for a premiums of $16.41, $12, $9, and $7.24 respectively.  Suppose the annual effective interest rate is 5% (i.e., a $100 bond pay ... Read More

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Objectives When Formulating a Risk Management Strategy

Question Suppose you are advising a gold mining firm on risk management strategy.  It has a mine capable of producing ten ounces of gold per year.  This year, the firm plans to produce 10 ounces.  The firm’s cost of production in $1200 per ounce, which it is committed to paying ... Read More

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Detailed and Analytical Valuation of  a Stock

Question Provide a detailed and analytical valuation of a selected stock. Also provide a statement of its portfolio’s relative risk and vulnerability to economic trends as well as the measures of profitability of the individual assets in its portfolio. Summary: This question belongs to finan ... Read More

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Reasons for Switching from One Convenience Product to Another

Question Make a list of all the convenience products you buy in a week (any week is okay). Does the list change from week to week based on need or your budget? What would it take to make you switch from one product to another? Summary This question belongs to finance and discusses about budget on ... Read More

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Business Strategy of Aspen Technology Inc

Question Aspen Technology, Inc:  Currency Hedging Review This case is intended to analyze how a small, young firm's business strategy creates currency exposure and a need to manage this exposure. It is designed to explore the conflicting rationales for risk management and the measurement of e ... Read More

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