Question

1. an investor considers investing in shares A and B. Stock A is currently trading at the price of $1000 with price earning ratio (PER) value of 10X, meanwhile stock B is currently trading at the price of $2000 with price earning ratio value of 20X. Its estimated that EPS stock A will increase 50% than its previous EPS in the next 3 months, while EPS stock B will decrease by 50% in the next 3 months. According to that estimation, the investor wants to buy a call option contract for stock A for 100 lot at a call option premium of $100 per share, and exercise price at $1200. For stock B, the investor wants to buy a call option contract (put option) with a put option premium of $100 and an exercise price of $1100. if the market price that occurs in 3 months is exactly the same as the investor's estimate, calculate the total profit (loss) obtained by the investor!

2. at present the Rubble exchange rate is 1 = USD 0.016 while USD 1 = IDR 14,041. It is also known that inflation in Russia is 2.4% and it is estimated that next month it will rise to 3.5%. while inflation in Indonesia is currently 3.41%. Based on these data, calculate what is the current exchange rate of one Russian Rubble to Rupiah? What is the Rubble exchange rate against Rupiahs for another month?

3. A firm needs to determine how many should be sold in order to reach breakeven. Total Fixed cost is 500 million, with variable cost of 500,000 per product. The selling price for each product is 1.25 million. Calculate the amount of product should be sold to reach breakeven. If the firm requires a profit margin of 25%, how many product should be sold?

4. a company is considering issuing convertible bonds, because the company anticipates that interest will go down in the next 5 years. it is known that if the company issues a straight bond, the company must pay a fixed interest of 10%. if the company issues a straight bond, the company can save interest at 3% per year. convertible bonds that will be offered are worth Rp50 million per share, with a tenor of 5 years. The convertible bonds will be exchanged after the third year to 200 lots of shares. at the time of the issuance of the convertible bonds, the market price of the shares was Rp 1500 per share. (a) calculate the value of the convertible bonds (b) what is the profit gained by the investor if you exchange the bonds in the 3rd year?

Answer 1

1]

PER = share price / EPS

EPS = share price / PER

share price = PER * EPS

Current EPS of Stock A = $1,000 / 10 = $100

Current EPS of Stock B = $2,000 / 20 = $100

Estimated EPS of Stock A in 3 months = $100 * (1 + 50%) = $150

Estimated share price of Stock A in 3 months = $150 * 10 = $1500

Estimated EPS of Stock B in 3 months = $100 * (1 - 50%) = $50

Estimated share price of Stock B in 3 months = $50 * 10 = $500

Profit on call option of Stock A

The share price in 3 months is higher than the exercise price. Therefore, a profit is made.

Profit = (share price in 3 months - exercise price - premium) * lot size

Profit = ($1500 - $1200 - $100) * 100

Profit = $20,000

Profit on call option of Stock B

The share price in 3 months is lower than the exercise price. Therefore, a loss is made.

Loss = premium * lot size

Loss = $100 * 100

Loss = $10,000

Total profit = $20,000 - $10,000

Total profit = $10,000