1. Sandra Dean  is considering purchasing shares in DM Designs.  The share price is currently $64.  Alternatively, Sandra can buy an out of the money call option with a striking price of $65, that is currently priced at $2.25.  Janet expects the stock price to rise to $68.  What is the difference between the stock's return on investment and the option's return on investment?

 

2. Twelve months ago a $1,000 face value, 6% coupon bond was selling for $1,100. Since then, the market yield has decreased by two percentage points. The bond pays interest semiannually and now has four years to maturity. What is the bond's price today?

Answer rating: 100% (QA)

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