Finance Answers

ii) Determine the price of a European put option on a non-dividend paying stock when the stock price is sh. 69, the strike price is sh. 70, the risk-free rate is 5% per annum, the volatility is 35% per annum, and the time to maturity is three months?

a) Distinguish between warrants and convertible securities

b) Your company wishes to raise a new debt capital on stock market. Your managing director has heard of warrants and traded options and suggests that an issue of debt, accompanied by either attached warrants or traded options might be attractive to investors and have benefits for your company.
Required:
Discuss whether you consider your managing director’s suggestions to be useful.

25) Your firm is one of the largest bakery’s in the area. As part of your risk management process, you are considering using options to hedge the price risk on your biggest input – wheat. You have determined that a price of R52/per ton would allow for you to keep the same profit margin as last year. The following wheat options offer a strike price of R50/per ton expiring in 1 month:
 Call options on wheat are selling at a premium of R0.87 per ton.
 Put options on wheat are selling for R0.72 per ton.
(a) Given the information above, will you need a call or a put option?
(b) If each option is for 100 tons, and you require 1000 tons of wheat, demonstrate the outcome if, at expiry, the spot price of wheat is (i) R40 per ton and (ii) R60 per ton.

5) Your firm is one of the largest bakery’s in the area. As part of your risk management process, you are considering using options to hedge the price risk on your biggest input – wheat. You have determined that a price of R52/per ton would allow for you to keep the same profit margin as last year. The following wheat options offer a strike price of R50/per ton expiring in 1 month:
▪ Call options on wheat are selling at a premium of R0.87 per ton.
▪ Put options on wheat are selling for R0.72 per ton.
(a) Given the information above, will you need need a call or a put option? ​ [1 mark]
(b) If each option is for 100 tons, and you require 1000 tons of wheat, demonstrate the outcome if, at expiry, the spot price of wheat is (i) R40 per ton and (ii) R60 per ton.

What are the functions of money

Neha would retire 30 years from today and she would need ₹ 6,00,000 per year after her retirement, with the first retirement funds withdrawn one year from the day she retires. Assume a return of 7% per annum on her retirement funds and if her planning is for 25 years after retirement,

Calculate:

a. How much lumpsum she should deposit in her account today so that she has enough funds for retirement?

b. How much she should deposit each year so that she has enough funds for retirement?