You own two lots of BHM stock which you bought two years ago. Now, it is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You own two lots of BHM stock which you bought two years ago. Now, it is traded at RM3.00 and has been very stable at this price. You have been receiving a 2.50 percent dividend over the last two years. You do not intend to sell the stock now but would not mind letting it go at a price range of RM3.80. Currently, in the market there are 30-day RM3.50 call and 30-day RM3.60 put. Both call and put are quoted at RM0.30. i) ii) Express the appropriate strategy that will let you either earn higher returns or sell the stock at RM3.80. (3 marks) Draw the complete payoff profile diagram for the above strategy. (5 marks) iii) Calculate the percentage return if the BHM stock price is now at RM4.10. (4 marks) You own two lots of BHM stock which you bought two years ago. Now, it is traded at RM3.00 and has been very stable at this price. You have been receiving a 2.50 percent dividend over the last two years. You do not intend to sell the stock now but would not mind letting it go at a price range of RM3.80. Currently, in the market there are 30-day RM3.50 call and 30-day RM3.60 put. Both call and put are quoted at RM0.30. i) ii) Express the appropriate strategy that will let you either earn higher returns or sell the stock at RM3.80. (3 marks) Draw the complete payoff profile diagram for the above strategy. (5 marks) iii) Calculate the percentage return if the BHM stock price is now at RM4.10. (4 marks)
Expert Answer:
Answer rating: 100% (QA)
Answer i To achieve higher returns or sell the stock at RM380 you can ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
Students also viewed these finance questions
-
Following are the prices of toothpaste (9 oz.), shampoo (7 oz.), cough tablets (package of 100), and antiperspirant (2 oz.) for August 2010 and August 2018. Also included are the quantity purchased....
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
A. What is the expected dividend in two years? Suppose NI = $85,000 B. What is Samsung's WACC? Samsung's capital structure is 65% ordinary equity and 35% debt. He has operating assets equal to...
-
Using the following information, decide whether Marks Video Games should close any of itsstores: Clawson Store Redford Store Port Huron Store Sales revenue Variable costs Direct fixed costs Indirect...
-
Gadolinium sulphate obeys Langevin's theory of paramagnetism down to a few degrees Kelvin. Its molecular magnetic moment is \(7.2 \times 10^{-23} \mathrm{amp}-\mathrm{m}^{2}\). Determine the degree...
-
In flowing from section (1) to section (2) along an open channel, the water depth decreases by a factor of 2 and the Froude number changes from a subcritical value of 0.5 to a supercritical value of...
-
Pletcher Dental Clinic is a medium-sized dental service specializing in family dental care. The clinic is currently preparing the master budget for the first 2 quarters of 2017. All that remains in...
-
A bacteria culture starts with 340 bacteria and grows at a rate proportional to its size. After 2 hours there will be 680 bacteria. (a) Express the population P after t hours as a function of t. Be...
-
Assume that: Johnstone and Joleen Straw each own 50% of the issued shares in the company. The Straws are to be assessed for taxation purposes in the current financial year as a small business on the...
-
Here are some inputs for a noncancellable lease arrangement: Semi-annual lease payment: $16,000 (used to determine PMT) Implicit rate: 7.5% (used to determine I/Y maybe?) Incremental borrowing rate:...
-
B. Berjasa bhd (BB) uses a standard costing system in their production of steel products. Since bB are more automated based production, machine hour is used as the basis in production. At the...
-
(1 point) Consider the multiplicative group Z1409 a) How many primitive elements does this group have? b) What is the probability that a randomly chosen member of this group is a primitive element?
-
If Net Working Capital = Current Assets Current Liabilities, what is Kelley Corp s net working capital for the year ending December 3 1 , 2 0 2 3 , given the following account balances? Accounts...
-
Greshak Corp. was the victim of several frauds during the current year that totaled approximately $ 2 5 0 , 0 0 0 . A review of Greshak's financial statements show the company generated a profit...
-
40. A company has sales of $1,250,000, cost of goods sold of $750,000, depreciation expenses of $250,000 and interest expenses of $55,000. If the company's tax rate is 34% and the income statement is...
-
Suppose you have been employed by Kam Steels Corporation as a financial manager. You want to change old inventory ordering system to the just-in-time inventory method. The shareholders and the CEO of...
-
Find the APR in each of the following cases: NUMBER OF TIMES COMPOUNDED Semiannually Monthly Weekly Infinite EAR APR 10.4% 8.9 11.6 15.4
-
Explain how the price-earnings ratio is related to the pricing of a new security issue and the dilution effect.
-
Shawn Pen & Pencil Sets Inc. has fixed costs of $80,000. Its product currently sells for $5 per unit and has variable costs of $2.50 per unit. Mr. Bic, the head of manufacturing, proposes to buy new...
-
The Jagged Pill Ltd. has placed a $60,000 nonrefundable deposit on a new venture. The deposit can be expensed immediately. This has entitled Jagged Pill to additional information (of a trade-secret...
-
In 2022, Mark purchased two separate activities. Information regarding these activities for 2022 and 2023 is as follows: The 2022 losses were suspended losses for that year. During 2023, Mark also...
-
In 2023, Julie, a single individual, reported the following items of income and deduction: Julie owns 100% and is an active participant in the rental real estate activity. What is her taxable income...
-
Jerry sprayed all of the landscaping around his business with a pesticide in June 2023. Shortly thereafter, all of the trees and shrubs unaccountably died. The FMV and the adjusted basis of the...
Study smarter with the SolutionInn App