Question

1.An investor buys stock for $1 million on July 23, 2017 and on the same day...

1.An investor buys stock for $1 million on July 23, 2017 and on the same day buys a put on the same stock with a strike price of $1 million for $150,000. On December 15, when the stock is worth $1,100,000 the investor sells the put for $25,000. On December 31, the fair market value of the stock is $1,070,000. The put and the stock constitute a straddle.

a.How much loss was realized on the sale of the put?

b.How much loss can be recognized?

c.What is the holding period of the stock on Dec. 31, 2017? 16 days

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume an investor buys 5 shares of Stock A on January 1 2015 for $80 per...
Assume an investor buys 5 shares of Stock A on January 1 2015 for $80 per share. During the year the stock paid $2 in dividends per share. On Jan 1, 2016, the investor purchases another 8 shares at $84. During the year the stock paid another $2 dividend. On Jan 1, 2017, the investor sells 3 shares for $85, but collects the same $2 in dividends throughout 2017 on the remaining shares. Finally on Jan. 1, 2018 the investor...
Assume an investor buys 5 shares of Stock A on January 1 2015 for $80 per...
Assume an investor buys 5 shares of Stock A on January 1 2015 for $80 per share. During the year the stock paid $2 in dividends per share. On Jan 1, 2016, the investor purchases another 8 shares at $84. During the year the stock paid another $2 dividend. On Jan 1, 2017, the investor sells 3 shares for $85, but collects the same $2 in dividends throughout 2017 on the remaining shares. Finally on Jan. 1, 2018 the investor...
Finman Corporation acquired a long-term investment $65 million of 4% bonds, dated July 1, 2017. The...
Finman Corporation acquired a long-term investment $65 million of 4% bonds, dated July 1, 2017. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Finman paid $60 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management is holding the bonds in its trading portfolio. As a result of changing market conditions, the fair value of the bonds at December 31, 2017, was $62 million. Required: 1....
1) Derivative markets differ from stock and bond markets in that: A. derivative products are a...
1) Derivative markets differ from stock and bond markets in that: A. derivative products are a zero sum game B. derivatives are not issued by the company that the contracts relate to C. both A and B D. none of the above 2) An investor buys a Call option on a stock for $5. The strike price is $40 per share. On the expiry date the market price of the stock is $42 per share. A. The investor has made...
1. Suppose an investor buys one share of stock and a put option on the stock....
1. Suppose an investor buys one share of stock and a put option on the stock. What will be the value of her investment on the final exercise date if the stock price is below the exercise price? (Ignore transaction costs.) Options: a)The exercise price. b)The value of one share of stock plus the exercise price. c)The value of one share of stock minus the exercise price. d) The value of two shares of stock. 2) Which of the following...
On July 1, 2017, Torvill Construction Company Inc. contracted to build an office building for Gumbel...
On July 1, 2017, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2019, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2017, 2018, and 2019. At 12/31/17 At 12/31/18 At 12/31/19...
On July 31, 2017, Sandhill Company paid $2,700,000 to acquire all of the common stock of...
On July 31, 2017, Sandhill Company paid $2,700,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Sandhill. Conchita reported the following balance sheet at the time of the acquisition. Current assets $840,000 Current liabilities $570,000 Noncurrent assets 2,400,000 Long-term liabilities 470,000 Total assets $3,240,000 Stockholders’ equity 2,200,000 Total liabilities and stockholders’ equity $3,240,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita...
On July 31, 2017, Wildhorse Company paid $2,850,000 to acquire all of the common stock of...
On July 31, 2017, Wildhorse Company paid $2,850,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Wildhorse. Conchita reported the following balance sheet at the time of the acquisition. Current assets $750,000 Current liabilities $600,000 Noncurrent assets 2,550,000 Long-term liabilities 500,000    Total assets $3,300,000 Stockholders’ equity 2,200,000    Total liabilities and stockholders’ equity $3,300,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita...
On July 31, 2017, Sheridan Company paid $2,750,000 to acquire all of the common stock of...
On July 31, 2017, Sheridan Company paid $2,750,000 to acquire all of the common stock of Conchita Incorporated, which became a division of Sheridan. Conchita reported the following balance sheet at the time of the acquisition. Current assets $740,000 Current liabilities $510,000 Noncurrent assets 2,450,000 Long-term liabilities 410,000    Total assets $3,190,000 Stockholders’ equity 2,270,000    Total liabilities and stockholders’ equity $3,190,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita...
6. You are an investor and have just purchased a bond on July 1 which pays...
6. You are an investor and have just purchased a bond on July 1 which pays interest every March 1 and September 1. When you receive your first interest cheque, you will receive and have earned how many months interest? Received Earned 1 6 6 2 6 2 3 2 2 4 4 4 Choice 1 Choice 2 Choice 3 Choice 4 8. KR Corporation was involved in a lawsuit with the Government alleging inadequate air pollution control facilities at...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT