FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!
Question
1 Approved Answer

You write 1000 call options and buy 700 shares of the underlying stock. The call options currently cost $7.43 and the shares of stock cost

You write 1000 call options and buy 700 shares of the underlying stock. The call options currently cost $7.43 and the shares of stock cost $59.94 apiece. One year from now, each call is worth $14.47 and each share of stock is worth $72.33. You make no other trades and there are no other cash flows. 


What is the percentage return on your portfolio over the year?

Step by Step Solution

★★★★★

3.46 Rating (153 Votes )

There are 3 Steps involved in it

Step: 1

initial portfolio investment and final portfolio value Initial P... 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

Fundamentals of Investing
Fundamentals of Investing

Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk

12th edition

978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359

More Books

Students explore these related Finance questions

Question

7.1. Using risk-neutral valuation, derive a formula for a derivative that pays cash flows over the next two periods. Assume the risk-free rate is 4 percent per period. The underlying asset, which...

Answered: 3 weeks ago

Question

The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...

Answered: 3 weeks ago

Question

Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...

Answered: 3 weeks ago

Question

Is the converse of the second part of Theorem 5.7 true? That is, if a function is one-to-one (and therefore has an inverse function), then must the function be strictly monotonic? If so, prove it. If...

Answered: 3 weeks ago

Question

Write as a single integral in the form ∫b f (x) dx: )dx

Answered: 3 weeks ago

Question

LO.3 Willa, a U.S. corporation, owns the rights to a patent related to a medical device. Willa licenses the rights to use the patent to IrishCo, which uses the patent in its manufacturing facility...

Answered: 3 weeks ago

Question

Distinguish between Thorndikes early law of effect and his later law of effect.

Answered: 3 weeks ago

Question

Calculating Payoffs Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $114. a. Suppose you buy 10 contracts of the February 110 call...

Answered: 3 weeks ago

Question

Riverbed Architects incorporated as licensed architects on April 1, 2025. During the first month of the operation of the business, these events and transactions occurred: Apr. 1 Stockholders invested...

Answered: 3 weeks ago

Question

write a title Understanding the roots of modern educational practices can provide valuable insights into their effectiveness and potential for improvement. One such root influencing contemporary...

Answered: 3 weeks ago

Question

Currently, the management at RR Ltd are in preliminary decisions on a horizontal acquisition of 'Sporty PLC'. Sporty PLC has an established men's fashion brand; however, it is seen as a 'Problem...

Answered: 3 weeks ago

Question

A client comes into a bank and requests to make a bank deposit of $9000. Under the Proceeds of Crime and Terrorist Financing Act of 2000 what must the bank do to be compliant with legislation? Select...

Answered: 3 weeks ago

Question

In the country Gamma it takes 6 hours to produce one automobile and 1 hour to produce a bale of cotton. In the country Delta it takes 10 hours to produce one automobile and 2.5 hours to produce a...

Answered: 3 weeks ago

Question

I. Suppose that there are only 10 individuals in the economy each with the following utility function over present and future consumption : U (c1, c2) = c1 + 2 / 3 c2, where c1 is consumption today,...

Answered: 3 weeks ago

Question

QUESTION 10/12 Company A's total royalty expenses for a specific product vary based on the total revenue (dollars in thousand), shown as below: Which of the following statements is correct? 1 point...

Answered: 3 weeks ago

Question

The relativistic Doppler shift causes the light from a distant galaxy to be blue shifted by 5%. What is the speed of the galaxy relative to the earth?

Answered: 3 weeks ago

Question

Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 20% debt and 80% equity; however, the CEO believes that the firm should...

Answered: 3 weeks ago

Question

Match each of the key terms with the definition that best fits it. _______________ A record of the sequence of data entries and the date of those entries. Here are the key terms from the chapter. The...

Answered: 3 weeks ago

Question

Compute the level of on-balance volume (OBV) for the following 3-day period for a stock, if the beginning level of OBV is 50,000 and the stock closed yesterday at $25. Does the movement in OBV appear...

Answered: 3 weeks ago

Question

What role, if any, will short-term investments play in your portfolio? Why? Complete the following table for the short-term investments listed. Find their current yields online, and explain which, if...

Answered: 3 weeks ago

Question

Rick owns stock in a retailer that he believes is highly undervalued. Rick expects that the stock will increase in value nicely over the long term. He is concerned, however, that the entire retail...

Answered: 3 weeks ago

Question

Develop a standard time for preparing a ham and cheese sandwich: a. List the steps (tasks) required to prepare the sandwich. b. Observe tire job for several repetitions and make improvements if...

Answered: 3 weeks ago

Question

An analyst has timed a metal-cutting operation for 50 cycles. The average time per cycle was 10.40 minutes, and the standard deviation was 1.20 minutes for a worker with a performance rating of 125...

Answered: 3 weeks ago

Question

How are tools such as a process chart and a worker-machine chart useful?

Answered: 3 weeks ago

Previous Question Next Question