1) Explain what options are. 2) Talk about different option markets. 3) Talk about American market. 4) Talk about European market. 5) Explain major differences. 1) An option is a financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of
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company's expansion and determined that the success of the new restaurants will depend critically on the state of the economy next year and over the next few years. McKenzie currently has a bond issue outstanding with a face value of $34 million that is due in one year. Covenants associated with this bond issue prohibit the issuance of any additional debt. This restriction means that the expansion will be entirely financed with equity, at a cost of $8.4 million. Sally has summarized her analysis
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Risk profile Let’s start our analysis of risk profile of IBM by comparing Betas of companies who operate in Tech industry. A beta coefficient tells us how much systematic risk a particular asset has relative to an average asset (which has beta equal to 1). As we can see IBM has less systematic risk than an average asset. IBM Apple Microsoft Sony Dell HP Siemens LG Beta 0.61 1 1 1.39 1.38 1.45 1.67 0.1 Mean 1.075 If we compute the arithmetic mean of these Betas we get a value slightly
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structure? 1 What is “Capital Structure”? Definition The capital structure of a firm is the mix of different securities issued by the firm to finance its operations. Securities Bonds, bank loans Ordinary shares (common stock), Preference shares (preferred stock) Hybrids, eg warrants, convertible bonds 2 What is “Capital Structure”? Balance Sheet Current Assets Current Liabilities Debt Preference shares Ordinary shares 3 Fixed Assets Financial Structure What
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can generally be classified into three different categories: bonds payable, notes payable, and capital leases. Bonds payable can be secured by collateral, such as a mortgage bond, or unsecured, backed only by a company’s promise to pay. Most bonds carry a stated rate of interest but others are sold at a discount with an implied rate of interest inherent in the discounted sale. Some bonds can be converted into other securities. Other bonds can be called in by the corporation. All of the terms and features
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Securities Market To meet enormous capital requirements, the companies rely on individual and institutional investors. The capital (long term) require by the company is divided into small units of fixed amount. These units are called ‘shares’. Companies issue these shares to the public to raise owned capital i.e.., shares represent ownership interest. Additional capital required for medium and short period, can be raised by the company through ‘Debentures’. The debenture is an acknowledgement for
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There was a general increase in the Bank’s portfolio of both assets and liabilities for the year ending December 31, 2010 when compared to the previous comparative period. This was mainly attributed to increases in the Bank’s loans and advances, investment securities and customer deposits. Assets for the year ending December 31, 2010 increased by $240,359 (29.22%) when compared to the previous year and this was primarily due to increases in Loans and Advance and Investment Securities which were
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to the geometric mean. BEHH agrees with this for bonds, but suggest arithmetic mean when using treasury bills (shorter time period). In our class notes it also states we use geometric mean for long term investments, but recommends 6% for OneMBA calculations e. For the cost of debt calculation Joanna used current interest payments which deviates from BEHH, Chapter 10 and class notes as all these stipulate that market yield of government bonds + estimated credit risk spread should be used.
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6. Security: Securities are the stocks that condone ownership or a bond that condones an agreement of debt. Types of securities include bonds, notes, common stocks, warrant or any type of financial assets. 7. Stock: Stock is the ownership in a company including a part of the profits and assets. There are two types of stock; a common stock and a preferred stock that are both based on dividends. 8. Bond: A bond is a form of fixed income security and it describes details of a loan. These
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Security – Bonds are a representation of a debt agreement, whereas Stocks are a representation of ownership. Securities can also be interest based or dividend based. * Stock – A Representation of ownership, or a claim to assets and earnings, within an issuing security or business. Stocks are classified into two different stocks, common and preferred. * Bond - A long term promissory note, or type of debt issued by a borrower. The borrower promises to pay the holder of a bond a predetermined
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