Fin 534 Homework Set 45

 

Question 4

2 out of 2 points An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options? Answer Selected Answer: Covered Correct Answer: Covered

Question 5

2 out of 2 points Which of the following statements is CORRECT? Answer Selected Answer: Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike  price, the lower the premium on the option is likely to be. Correct Answer: Call options generally sell at prices above their exercise value, but for an in-the-money option, the greater the exercise value in relation to the strike  price, the lower the premium on the option is likely to be.

Question 6

2 out of 2 points Braddock Construction Co.'s stock is trading at $20 a share. Call options that expire in three months with a strike price of $20 sell for $1.50. Which of the following will occur if the stock price increases 10%, to $22 a share? Answer Selected Answer: The price of the call option will increase by less than $2, but the  percentage increase in price will be more than 10%. Correct Answer: The price of the call option will increase by less than $2, but the  percentage increase in price will be more than 10%.

HOMEWORK SET 5 or show your work if a mathemaTcal calculaTon is needed, or both. Submit your assignment using the assignment link in the course shell. ±his homework assignment is worth 100 points. YOU MUST ENTER CORRECT INFORMATION IN THE YELLOW-CODED CELLS DO NOT TOUCH THE NON-YELLOW-CODED CELLS ANSWERS ARE IN THE RED-BORDERED CELLS Use the following informa±on for Ques±ons 1 through 3: Boehm CorporaTon has had stable earnings growth of 8% a year for the past 10 years and in 2013 Boehm paid dividends of $2.6 million on net income of $9.8 million. However, in 2014 earnings are expected to jump to $12.6 million, and Boehm plans to invest $7.3 million in a plant expansion. ±his one-Tme unusual earnings growth won't be maintained, though, and aFer 2014 Boehm will return to its previous 8% earnings growth rate. Its target debt raTo is 35%. Calculate Boehm's total dividends for 2014 under each of the following policies. 1. Its 2014 dividend payment is set to force dividends to grow at the long-run growth rate in earnings.

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