Financial Markets Question 1 .. An investor agrees to purchase 100 shares of ABC

Question

Financial Markets

Question 1 .. An investor agrees to purchase 100 shares of ABC Corp. stock in six months. She is worried the stock price will rise significantly over the next six months. The spot price of the stock is $54 and she buys a six-month call with a strike of $60 for $211. At expiration the stock is at $61. What is the net economic gain or loss on the entire stock/option portfolio?
Answer Format: Round to dollars. Do not include dollar sign or thousands separator

Question 2.. When would you prefer option hedge over a futures or forward hedge?

Question 3 .. What are the major advantages a bank gains by expanding into international bank services? What are three disadvantages of international expansion?

Question 4 .. A bank is earning 4.6 percent on its $225 million in earning assets and is paying 2.55 percent on its liabilities. What is the bank's interest rate spread?
Answer Format: Round to four decimal places. Use decimals, not percent’s in your answer. For example, if you find that the interest rate spread is 12.34%, write 0.1234 in the box.

Thank you so much.

Explanation / Answer

Solution:

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Question 1 Net Gain or Loss = Net Gain on ( $ 54- $ 61 ) * 100 shares -700 Add: ( $ 61 - $ 60 ) * 100 100 Less: $ 211 -211 Net Gain or Loss = -811

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