Week 7
INVESTMENTS
Chapter 17
Problem 2: Call option $4; strike price $25; current market cost $26
a) Market value strike price = $25 26 = $1.00 intrinsic value; Time premium = cost intrinsic
value or $4.00 - $1.00 = $3.00 time premium
b) If market price
Week2
INVESTMENTS
Chapter 4
(a) Problem 1: Capital Gains = $4,700.00 / Taxes due for short term = $1,316.00
Stock
Bought
Sold
Gain or Loss
Short Term
(28%)
ABC
24,500
28,600
4,100
1,148.00
DEF
35,400
31,000
-4,400
-1232.00
GHI
31,000
36,000
5,000
1,400.00
Week 5
INVESTMENTS
Chapter 14
Problem 1: Principal $1,000; Rate 8%; Maturity 10 years
a) N=10; I=8; PMT = 80 = Present Value is Par $1,000.
b) N=10; I=10; PMT = 80; FV=1,000 = Below Par $877.11
c) 80/1000 Bond a = 8% current yield; 80/877.11 bond b = curr
Week 3
INVESTMENTS
Chapter 9
Problem 2:
Required return 12%; sells for $25.00 dividend $1.00 compound at 7%
V = $1.00(1+.07)/.12-.07 = 1.07/.05 = $21.40 Value of Stock, No, do not buy at $25.00
$1.00(1.07)/25.00 +.07 = Return of 11.2% less than the 12% th
Week I
INVESTMENTS
Chapter 2:
Problem 1:
Sold @ $1,750.00 - Buy @ $1000.00 = Gain of $750.00
(a) 25% Margin req. of $1,000 = $250.00: 750.00 250.00 = 3 or 300% gain
(b) 50% Margin req. of $1,000 = $500: 750.00 500.00 = 1.5 or 200% gain
(b) 70% Margin req.