1 a corporate bond promises to pay 100 in one year the bond, Ask an Expert

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1. A corporate bond promises to pay $100 in one year. The bond has a default probability of .3 and its market beta is 0.3. The equity premium is 4%; the equivalent Treasury rate is 3%. Assume that the bonds pays out nothing in the default state. Find the appropriate bond price today.

2. Covered Call Strategy:

Carlos purchased 100 shares of stock in Company Alpha for $20 a share. He recently sold a call on the stock for $1.75 with a strike price of $36. The stock has since increased in price to $43 per share. How much will Carlos make on this stock if the option is excercised?

The total profit Carlos wil make is____.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92741195

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