Suppose that you decided to set up a short strip position using the Jan. 105 options. Find your profit/loss if the stock trades for $110 when the options expire. Round intermediate steps to four decimals and your final answer to two decimals. Do not use the dollar sign when entering your answer.

Suppose that you decided to set up a long strap position using the Feb. 110 options. Find your profit/loss if the stock trades for $127 when the options expire. Round intermediate steps to four decimals and your final answer to two decimals. Do not use the dollar sign when entering your answer.

A hedge fund manager believed that DEF stock would be relatively stable over her investment horizon and decided to use the Feb 120 options to create a straddle position based on her belief. If the stock trades for $127 when the options expire, what is her profit/loss?

• -90
• 90
• 280
• -280
• None of the above

Suppose that you decided to create a long strangle position using the 115 Feb call and the 110 Feb put when the stock price traded at $112. Find your profit/loss if the stock trades at $118 when the options expire.

• 105
• -105
• 605
• -605
• None of the above

Tucker Inc. common stock currently trades for $90/share. 6-month European put options on the stock have an exercise price and premium of $93 and $4, respectively. The annual risk free rate is 2%. What should be the value of a 6-month European call option on the stock with an exercise price of $93 according to put-call parity? Round intermediate steps to four decimals and your final answer to two decimals.

• 7.90
• .065
• 1.93
• 2.84
• 2.15

Suppose 6-month European call options with an exercise price of $93 actually have a market price of $2.15. Which of the following strategies could you employ to earn an arbitrage return?

• Short the market call, buy the stock, buy the put and short the present value of the exercise price at the risk-free rate.
• Buy the market call, short the stock, short the put and invest the present value of the exercise price at the risk-free rate.
• Short the market call, buy the stock, buy the put and invest the present value of the exercise price at the risk-free rate.
• Arbitrage is not possible.
• None of the above.

Find the arbitrage profit you could earn per call option.

• 575
• 209
• 69
• 22
• 0

Question 4

The stock of ABC Inc is trading at $50. You short sold 350 shares of ABC at this price. However, price increased to $55, at which point you decided to close the trade. What was your percentage return? The initial margin rate is 75%.

Question 5

Consider the short sale trade in the previous question. If your brokerage requires a maintenance margin of 40%, at what price will you get a margin call? The initial margin rate is 75%.

Question 6

You find that in a normal year, the S&P500 index gives a return of 12%. However, you think that there is a 40% probability of the economy going into recession next year. If that happens, you predict that the index return will be 2%. What is the expected return on the S&P500 next year?

Richards Inc. stock currently trades for $40, but you believe the company's earnings will decrease dramatically in the next six months which in turn will cause the company's stock to depreciate. Six-month European call options on the stock have an exercise price of $45 and a premium of .75. The annual risk free rate is 3%. You want to create a portfolio that mimics the payoff of owning a 6-month European put on on the stock. Which of the following steps must you do in order to achieve this payoff?

• Buy the call option, sell the stock, and borrow the present value of $4500 discounted at the risk-free rate.
• Sell the call option, buy the stock, and invest the present value $4500 discounted at the risk-free rate.
• Buy the call option, sell the stock, and invest the present value of $4500 discounted at the risk-free rate.
• Sell the call option, sell the stock, and invest the present value $4500 discounted at the risk-free rate

What should be the price of a six-month European put option with an exercise price of $45 according to put-call parity? Round intermediate steps to four decimals and your final answer to two decimals. Do not use currency symbols or words when entering your response.

Find your portfolio's profit/loss if Richards stock sells for $32 at the end of six-months. Round intermediate steps to four decimals.

• 508
• 792
• -792
• -508
• 658

compare and contrast capital asset model to the free cash flow model?

You analyzed the returns of a sample of stocks. You found that, on average, the firms with high E/P ratios have higher subsequent returns.

(i) Discuss an explanation for this pattern that is consistent with the EMH.

(ii) Discuss an explanation that is not consistent with the EMH.

(A couple sentences per part.)

Clever tests to discriminate between alternative explanations. LaPorta, Lakonishok, Shleifer, and Vishny (“Good News for Value Stocks,” Journal of Finance, June 1997) study the returns on stocks on the few days surrounding their quarterly earnings announcements (relative to various expected return benchmarks). They find that on average, high-B/M stocks earn 0.9% around an earnings announcement. In contrast, low-B/M stocks earn an average of -0.1% around an earnings announcement. The difference is statistically significant.

(i) High returns around earnings announcements are more likely to occur if the earnings surprise is _______. (Fill in the blank with “positive” or “negative”.)

(ii) Discuss whether the return pattern found by LaPorta et al. (1997) around earnings announcements is more consistent with the irrational expectations (behavioral) view, or the risk factor (efficient markets) view of the book-to-market effect, and explain your logic.

You have been given the following return​ data,

F, ​G, and H over the period 2018 2021. Using these​ assets, you have isolated three investment​ alternatives:

a. Calculate the portfolio return over the​ 4-year period for each of the three alternatives. b. Calculate the standard deviation of returns over the​ 4-year period for each of the three alternatives. c. On the basis of your findings in parts a and b​, which of the three investment alternatives would you​ recommend? Why?

What is a loan amortization schedule, and what are some ways these schedules are used?

The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented this new technology. He then formed a corporation and invested $1,500,000 in setting up a production plant. He believes that he could sell his patent for $72 million.

a. What is the book value of the firm? (Enter your answer in dollars not in millions.)

b. What is the market value of the firm? (Enter your answer in dollars not in millions.)

c. If there are two million shares of stock in the new corporation, what would be the book value per share? (Round your answer to 2 decimal places.)

d. If there are two million shares of stock in the new corporation, what would be the price per share? (Round your answer to 2 decimal places.)

Jim wants to buy a property and needs to borrow 195,000. He can get a loan at 7% for 25 years. Loan origination fees will be $4,700. Assume the lender also imposes a prepayment penalty of 3 percent of the outstanding loan balance if the loan is repaid within 8 years of closing. If Jim repays the loan after 6 years with the penalty, what is the effective interest rate?

8.1%

7.0%

7.9%

7.5%

Use the following financial statements for Lake of Egypt Marina, Inc.

Calculate the following ratios for Lake of Egypt Marina, Inc. as of year-end 2021. (Use sales when computing the inventory turnover and use total stockholders' equity when computing the equity multiplier. Round your answers to 2 decimal places. Use 365 days a year.)

Profit Margin) (answer is not 30.68 or 55.33)

ROA) (answer is not 17.36 or 18.64 or 18.05)

Days sales in inventory) (the answer is not 309.46 or 138.21 or 1.179 or 1.18)

ROE) (the answer is not 38.25 or 44.38 or 39.50)

Finance is exciting! In this course, we learned how money can grow through the use of compounding and interest rates and your growth strategies may now be different. What are your new financial goals? Would you like to become more liquid, to save more for your retirement, or to start a new business? Whatever your goals, finance is right at the core. Think about what you learned in this course regarding investing to complete this assignment.

Write a two to three (2-3) page paper in which you: Describe (3) ways you will invest in your future based on the principles of finance discussed in this course. Include terminology from the course and use citations as necessary to support your explanation of the terminology. Discuss one of the (3) ways you feel most confident as a way to invest in your future. Explain your level of confidence. Of the (3) ways you will invest in your future, discuss the one you perceive might be the most challenging. Then, discuss how you might overcome some of those challenges.

1. Dana needs to make some house repairs in three years that will cost $8,000. She has some money in an account earning 6% annual interest. How much money needs to be in the account today so she will have enough to pay for the repairs?

2. Unfortunately, Dana doesn't have enough money in her account right now. She needs to make additional contributions at the end of each of the next three years to be able to pay for the repairs. Her account currently has $3,500, which, along with her additional contributions, is expected to continue earning 6% annual interest. If she makes equal contributions each year, how large must each contribution be for Dana to have $8,000 after three years?