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Question 1: You are buying a put option of GM at a strike price of $75 and maturity of 1 month. The current trading price is $75. The price of the option is $2. What would the major motive to buy the put option? What is the maximum loss for the investment? What is the maximum gain?

Question 2: What's the benefit of buying on margin? If the initial margin is 50%, maintenance margin is 40%, when will you receive a margin call for the stock you bought at $50/share at margin?

Question 3: Assume that you have invested $100 in a fund one year ago, the annual return is 6% over the year. How much does the investment worth now? How much will it be next year if the return remains the same?

Note: Provide support for your rationale.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91163121

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