Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hi, I need help with my finance assignment please... The Gifford Investment Company bought 110 Cable Corporation warrants one year ago and would like to

Hi, I need help with my finance assignment please...

The Gifford Investment Company bought 110 Cable Corporation warrants one year ago and would like to exercise them today. The warrants were purchased at $25 each, and they expire when trading ends today. (Assume there is no speculative premium left.) Cable Corporation common stock was selling for $48 per share when Gifford Investment Company bought the warrants. The exercise price is $37, and each warrant entitles the holder to purchase two shares of stock, each at the exercise price.

a. What was the intrinsic value of a warrant at the time of purchase? (Do not round intermediate calculations and round your answer to 2 decimal places.)

b. What was the speculative premium per warrant when the warrants were purchased? The purchase price, as indicated earlier, was $25. (Do not round intermediate calculations and round your answer to 2 decimal places.)

c. What would Giffords total dollar profit or loss have been had they invested the $2,750 directly in Cable Corporations common stock one year ago at $48 per share? Cable Corporation common stock is selling today for $58 per share. (Do not round intermediate calculations and round your answer to 2 decimal places. Input the dollar amount as a positive value.)

d. What would the percentage rate of return be on this common stock investment? Compare this to the rate of return on the warrant computed when the common stock was selling for $58 per share.

Percentage return on stock?

Percentage return on Warrants?

(Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

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

Energy Finance And Economics Analysis And Valuation Risk Management And The Future Of Energy

Authors: Betty Simkins, Russell Simkins

1st Edition

1118017129, 978-1118017128

More Books

Students also viewed these Finance questions

Question

Explain the meaning of ergonomics.

Answered: 1 week ago