Given the Following Information

question 26

Essay

Given the following information,
     Price of a stock                             $39
     Strike price of a six-month call     $35
     Market price of the call                 $8
     Strike price of a six-month put      $40
     Market price of the put                  $3
Finish the following sentences:
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a. The intrinsic value of the call is _________.
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b. The intrinsic value of the put is _________.
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c. The time premium paid for the call is _________.
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d. The time premium paid for the put is _________.
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At the expiration of the options (i.e., after six months have lapsed), the price of the stock is $45.
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e. The profit (loss)from buying the call is _______.
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f. The profit (loss)from writing the call covered (i.e., buying the stock and selling the call)is ________.
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g. The profit (loss)from buying the put is _______.
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h. The profit (loss)from selling the stock short is ______.
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i. The maximum possible loss from buying the put is ______.
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j. At expiration, the maximum price commanded by a put or a call is _______.

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Definitions:

Contingent Rentals

Rental payments that are not fixed or determined upfront but depend on the occurrence of a future event or condition.

Accumulated Amortization

The total amount of amortization expense that has been applied to a fixed asset since its purchase.

Future Minimum Lease Payments

The total amount of payments that the lessee is expected to make under the lease agreement over its term.

Direct Financing Lease

A leasing arrangement in which the lessor purchases an asset for the lessee and rents it out, with the lease payments designed to cover the original cost plus a profit margin.