Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume you purchase 200 units of Chamali share at RM212 per share. To protect your investment, your remisier advise you to also purchase an option

image text in transcribed

Assume you purchase 200 units of Chamali share at RM212 per share. To protect your investment, your remisier advise you to also purchase an option as back up. Since share prices fluctuates all the times, and you scared risking your total investment, you agreed to the remisier's suggestion and proceed to buy the option at a strike price of RM212 per share. The option has an expiration date of 30 days and you pay RM800 as the premium. i. Calculate the total cost of your shares. (2 marks) ii. Identify the type of option that you should purchase. (2 marks) iii. Assume the price of the shares goes up to RM300 per shares: 1. Decide on your option exercise right. (2 marks) 2. Calculate the net profit / (loss) from the above investment. (2 marks) i. Assume the price of the shares goes down to RM150 per shares. 1. Decide on your option exercise right. (2 marks) 2. Calculate the net profit / (loss) from the above investment. (2 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Oxford Handbook Of Entrepreneurial Finance

Authors: Douglas Cumming

1st Edition

0195391241, 978-0195391244

More Books

Students also viewed these Finance questions

Question

What are the characteristics of a normal distribution?

Answered: 1 week ago