Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mr. John Halley has $800 to invest in the market He is considering the purchase of 80 shares of Comet Airlines at $10 per share.

image text in transcribed
image text in transcribed
Mr. John Halley has $800 to invest in the market He is considering the purchase of 80 shares of Comet Airlines at $10 per share. His broker suggests that he may wish to consider purchasing warrants instead. The warrants are selling for $2, and each warrant allows him to purchase one share of Comet Airlines common stock at $20 per share. a. How many warrants can Mr. Halley purchase for the same $800? (Do not round intermediate calculations and round your answ to the nearest whole number.) nswer Number of warrants purchased warrants b. If the price of the stock goes to $30, what would be his total dollar and percentage return on the stock? (Do not round intermediate calculations. Round the first answer to the nearest whole dollar. Input the second answer as a percent rounded to 2 decimal places.) Total dollar return on the stock Percentage return on the stock C. At the time the stock goes to $30, the speculative premium on the warrant goes to 0 (though the market value of the warrant goes up). What would be Mr. Hailey's total dollar and percentage returns on the warrant? (Do not round intermediate calculations. Round the first answer to the nearest whole dollar. Input the second answer as a percent rounded to 2 decimal places.) Total dollar return on the warrant Percentage returm on the warrant d. Assuming that the speculative premium remains $3.50 over the intrinsic value, how far would the price of the stock have to fall from $30 before the warrant has no value? (Do not round intermediate calculations and round your answer to 2 decimal places.) New stock price

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 Private Equity Toolkit A Step By Step Guide To Getting Deals Done From Sourcing To Exit

Authors: Tamara Sakovska

1st Edition

1119697107, 978-1119697107

More Books

Students also viewed these Finance questions

Question

c. What personal behavior is acceptable and nonacceptable?

Answered: 1 week ago