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Homework answers / question archive / In-Class Chapter 19 i Seved 6 Mr
In-Class Chapter 19 i Seved 6 Mr. John Hailey has $1,200 to invest in the market. He is considering buying 40 shares of the Comet Airlines at $30 per share. His broker suggests that he may wish to consider purchasing warrants instead. The warrants are selling for $10, and each warrant allows him to purchase one share of Comet Airlines common stock at $25 per share. 10 points a. How many warrants can Mr. Hailey purchase for the same $1,200? Warrants eBook b. If the price of the stock goes to $45, what would be his total dollar and percentage return on the shares? (Round the percentage answer to 2 decimal places.) Print Total dollar return on the stock Percentage return on the stock References c. At the time the shares go to $45, the speculative premium on the warrant goes to zero (though the intrinsic value of the warrant goes up). What would be Mr. Hailey's total dollar and percentage return on the warrant? (Round the percentage answer to 2 decimal places.) Total dollar return on the warrant Percentage return on the warrant d. Assuming the speculative premium remains $3.50 over the intrinsic value, how far would the price of the stock have to fall before the warrant has no value? (Round the final answer to 2 decimal places.) Stock price
