The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, the price of a three-month call option with an exercise price of$100 is $10, and a put with the same expiration date and exercise price costs$7.
a. What would be a simple options strategy to exploit your conviction about the stock price’s future movements?
b. How far would the price have to move in either direction for you to make a profit on your initial investment?
Identify nine possible sources of job leads.
AM Express Inc. is considering the purchase of an additional delivery vehicle for $55,000 on January 1, 20Y1. The truck is expected to have a five-year life with an expected residual value of$15,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $58,000 per year for each of the next five years. A driver will cost$42,000 in 20Y1, with an expected annual salary increase of $1,000 for each year thereafter. The annual operating costs for the truck are estimated to be$3,000 per year.
C. Is the additional truck a good investment based on your analysis? Explain.
