Question

40) You purchased 300 shares of a non-dividend paying stock for $25.2 a share 6 months ago. Today, you sold those shares for $36.1 a share. What was your percentage annualized rate of return on this investment?

41) You purchased 300 shares of SLG, Inc. stock at a price of $43.3 a share. You then purchased put options on your shares with a strike price of $40.00 and an option premium of $1.8. At expiration, the stock was selling for $47.7 a share. You sold your shares on the option expiration date. What is your net profit or loss your transactions related to SLG, Inc. stock?

Answer 1

40)
Purchase price of share = 25.20
Selling Price of share = 36.1
Annualized return = (Sales price- Purchase price) / Purchase price * 12/ months = ((36.1 - 25.2)/25.2 * 12/6 = 86.51%

41)
Cost of share = 43.30
No of shares = 300
Total investment = 300 * 43.30 = 12990
Option Premium = 1.8
Total Invetment on put options = 300 * 1.8 = 540
Total Investment = 12990 + 540 = 13530
On or before expration date if you sold the option you will not be in the money and the the share will be sold at strike price
So Sales of stock = Strike price * no of shares = 40 * 300 = 12000
Loss from the transaction = 12000 - 13530 = -1530
Loss in the transaction = 1530.

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