Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Help The Manning Investment Company bought 100 Cable Corp. warrants one year ago and would like to exercise them today. The warrants were purchased for

image text in transcribed
Help The Manning Investment Company bought 100 Cable Corp. warrants one year ago and would like to exercise them today. The warrants were purchased for $28 each, and they expire when trading ends today (assume there is no speculative premium left). Cable Corp. common stock is selling today for $40 per share. The option price is $36, and each warrant entities the holder to purchase two shares of stock, each at the option price. (Leave no cells blank - ensure that "O" is entered wherever required.) a. What was the intrinsic (minimum) value of a warrant at that time? Intrinsic value b. What was the speculative premium per warrant when the warrants were purchased? Speculative premium c. What would the Manning Investment Company's total dollar profit or loss have been had it invested the $2,800 directly in Cable Corp's common stock one year ago at $40 per share and sold it today at $57 per share. (Input the answer as positive value. Round intermediate calculations. Round the final answer to the nearest whole number) (Click to select) d. What would the percentage rate of return be on this common stock investment? Compare this to the rate of return on the warrant investment computed when the common stock was selling for $57 per share. (Round the final answer to 2 decimal places.) Rate of return % (Click to select)

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_2

Step: 3

blur-text-image_3

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

Corporate Finance Theory And Practice

Authors: Aswath Damodaran

2nd Edition

0471283320, 9780471283324

More Books

Students also viewed these Finance questions