1. Aaron services whose shares are presently trading on the Toronto stock exchange at a price of $60 per share (rights-on) has just announced a right offering .under the terms of the offering each shareholder will receive one right for every share held. In exchange for four rights, holders may purchase one common share for $56.Assume that you have $18,000 to invest.

1. How many rights can you purchase with the funds
2. How many shares could you purchase with the fund
3. If the price of the share goes to $64 per share(ex-rights) what will be your dollar value and % profit/Loss on your investment in rights and in shares?
4. If the price of the share goes to $55 per share(ex-rights) what will be your dollar value and % profit/Loss on your investment in rights and in shares?

2.The following shares and options trade at the identified prices.The options have a July expiry and the identified strike prices

Share price call option price put option price

Abracadabra 58.85 13.3 2.95 Strike at $50

Cinder 45.1 2.4 2.30 Strike at 45

I-invest 8.01 1.7 1.50 strike at 8

Tomato 39.87 2.85 2.70 Strike at $40

1. Calculate the intrinsic (minimum) value and the speculative premium on the call option of each company
2. Calculate the intrinsic (minimum) value and the speculative premium on the put option of each company
3. If the share price of Abracadabra goes to $70, calculate the price of the call and put options if both have a speculative premium of $0.50
4. If the share price of Abracadabra goes to $45, calculate the price of the call and put options if both have a speculative premium of $1.25

3.Fred jury is a portfolio manager who has $1,200,000 of a client money to invest in highly speculative instruments. Jury is contemplating the purchase of 40,000 of shake corporation common stock which is currently selling on the TransCanada stock exchange at $30 per share. Alternatively, he could buy warrants of shake corporation common stock for $6.60.Each warrant gives the holder right to buy one share of shake corp. common stock at $27 per share

a. How many warrants could Mr Jury buy with the $1,200,000?

b. If he had purchased the common stock directly, and its price had increased to $37.20 per share, calculate his dollar and percentage return on the investment.

c. Assume that when the price of the stock goes to $37.20 per share, the warrant sells for its intrinsic value. If Jury sells his warrants at this point, calculate his dollar and percentage return on the investment.

4. The XLarge Corporation has a convertible bond outstanding with a conversion price of $28 per share. The $1000 par value bonds have a 5% coupon rate and 20 years to maturity. The firms common stock is currently selling for $36 per share and the bonds are selling for $1300

a. Calculate the conversion ratio

b. Calculate the conversion value

c. If equivalent bonds are currently yielding 12% to maturity, what is the pure bond value of this bond?