23 Jun Assume a $1,000 treasury bill is quo
Assume a $1,000 treasury bill is quoted to pay 10 percent and matures in 3 months.
a) How much interest would an investor receive?
b) What will be the price of the treasury bill?
c) What will be the effective yield?
ABC Corp. issued a 12 percent, 20 year coupon rate bond 5 years ago. Interest rates are now 8 percent. The par value of the bond is $1,000. Based on semi-annual analysis, what is the current price of the bond?
3. Assume that a stock is selling for $47 with options available at 20, 30, and 40 strike prices. The 40 call option is at 7 1/2. Calculate the following:
(a) The intrinsic value of the $40 call
(b) Is the call in the money?
(c) The speculative premium on the 40 call option
(d) The percent the speculative premium represents of the common stock price.
Assume you sell 100 shares of Larson Corporation short at $61. You also buy a 60 call option for $3.5 to protect against the stock price going up.
(A). If the stock ends up at $80, what will be your overall gain or loss?
(B). If the stock ends up at $40, what will be your overall gain or loss?
(C). What is the most you can lose under this short sale-call option plan?
(D). If you have an unprotected short sale position (no call option), what is the most you could lose?
5.
(a.) You invest in the Canadian Equity market and you lose 20 percent (quoted in Canadian dollars). In the meantime the United States dollar declines by 5 percent against the Canadian dollar. What is your percentage gain or loss translated into dollars?
(b.) What if the United States dollar declines by 10 percent against the Canadian dollar, what would be your percentage gain or loss translated into dollars?
6.
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