Homework Clinic

Social Science Clinic => Business => Finance => Topic started by: sarasara on Apr 14, 2019

Title: An investor purchases a call option in a stock that is currently selling for $50 per share on ...
Post by: sarasara on Apr 14, 2019

Question 1

Which of the following asset allocation strategies subjects you to relatively high risk and high return?

◦ 60% U.S. stocks, 30% real estate, 10% stocks in developing counties
◦ 20% large U.S. stocks, 20% small U.S. stocks, 40% bonds, 20% CDs
◦ 50% bonds, 25% CDs, 25% large U.S. stocks
◦ 25% large U.S. stocks, 25% CDs, 10% real estate, 40% bonds

Question 2

An investor purchases a call option in a stock that is currently selling for $50 per share on January 3, 2016. He pays $6 per share for the option with an exercise price of $57 and an expiration date of April 17, 2016. On April 16, 2016 the stock is selling for $58 and the investor exercises the option and immediately sells the stock. How much total gain or loss did the investor realize?

◦ - $500
◦ $100
◦ Breakeven
◦ $700

Title: An investor purchases a call option in a stock that is currently selling for $50 per share on ...
Post by: mk6555 on Apr 14, 2019

Answer 1

60% U.S. stocks, 30% real estate, 10% stocks in developing counties

Answer 2

- $500