The market received rumors about Arvind Corporation's tie up with the multinational company. This has induced...
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The market received rumors about Arvind Corporation's tie up with the multinational company. This has induced the market price to move. If the rumor is false, the Arvids stock price will probably fall dramatically. To protect from this an investor has bought the call and put options. Purchased one 3 month call with a striking price of Ksh.42 for Ksh.2 premuim (ii) Paid Ksh.1 per share premium for a 3 month put with a striking price of Ksh.40. Required: (a) Determine the investor's position if the tie up offer bids the price of Arvind's stock up to Ksh.43 in 3 months. (5 marks) (b) Determine the investor's ending position if the tie up program fails and the price of the stock falls to Ksh.36 in 3 months. (5 marks) The market received rumors about Arvind Corporation's tie up with the multinational company. This has induced the market price to move. If the rumor is false, the Arvids stock price will probably fall dramatically. To protect from this an investor has bought the call and put options. Purchased one 3 month call with a striking price of Ksh.42 for Ksh.2 premuim (ii) Paid Ksh.1 per share premium for a 3 month put with a striking price of Ksh.40. Required: (a) Determine the investor's position if the tie up offer bids the price of Arvind's stock up to Ksh.43 in 3 months. (5 marks) (b) Determine the investor's ending position if the tie up program fails and the price of the stock falls to Ksh.36 in 3 months. (5 marks)
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Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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