1. Find the after-tax return to a corporation that buys a share of preferred stock at $53, sells it at year-end at $53, and receives a $6 year-end dividend. The firm is in the 21% tax bracket. (Round your answer to 2 decimal places.)

Its not 8.94

2.

Refer to the stock options on Microsoft in the Figure 2.10. Suppose you buy a November expiration call option on 200 shares with the excise price of $135.

Required:

a-1. If the stock price at option expiration is $143, will you exercise your call?

multiple choice 1

• Yes

• No

a-2. What is the net profit/loss on your position? (Input the amount as a positive value.)

a-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

b-1. Would you exercise the call if you had bought the November call with the exercise price $130?

multiple choice 2

• Yes

• No

b-2. What is the net profit/loss on your position? (Input the amount as a positive value.)

b-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

c-1. What if you had bought the November put with exercise price $135 instead? Would you exercise the put at a stock price of $135?

multiple choice 3

• Yes

• No

c-2. What is the rate of return on your position? (Negative value should be indicated by a minus sign.)