Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The Manning Investment Company bought 100 Cable Corp. warrants one year ago and would like to exercise them today. The warrants were purchased for $27
The Manning Investment Company bought 100 Cable Corp. warrants one year ago and would like to exercise them today. The warrants were purchased for $27 each, and they expire when trading ends today (assume there is no speculative premium left). Cable Corp. common stock is selling today for $50 per share. The option price is $33, and each warrant entitles 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 $2,700 directly in Cable Corp.'s common stock one year ago at $50 per share and sold it today at $54 per share. (Input the answer as positive value. Round intermediate calculations. Round the final answer to the nearest whole number.) Profit $ 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 $54 per share. (Round the final answer to 2 decimal places.) Rate of return % less than return on warrant
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started