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Q9 . Assume the stock price in the above problem is computed as $20 with a margin of error at 10%. Also assume the stock

Q9. Assume the stock price in the above problem is computed as $20 with a margin of error at 10%. Also assume the stock is currently trading at $18. Therefore:

a. This is a buy stock (recommend to buy)

b. This is a sell stock (recommend to sell)

c. This is both a buy stock and a sell stock

d. The margin of error is too narrow in this case

e. We take no action (do not buy; do not sell.)

Q10. Refer to the equation we discussed for computing the FCF (free cash flow.) A decrease in the net working capital, holding other variables constant, will

a. Decrease the FCF

b. Increase the FCF

c. Increase the net Income

d. Both b and c

Q11. You are buying 5 contracts of a call option with an exercise (strike price) of $100. You pay $10 premium per share. You exercise this option after three months when the stock price reaches at $130. The annualized rate of return in this trade is:

a. 10%

b. 100%

c. 400%

d. None of the above. My answer is ..

Q12. You are buying 5 contracts of a put option with an exercise (strike price) of $100. You pay $10 premium per share. The stock price reaches at $130 when the option is about to expire in three months. The rate of return for three months in this trade is:

a. $20

b. $30

c. -400%

d. -100%

e. None of the above. My answer is ..

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