Question 1
Question#1: An at-the-money European call on a futures sells for $5.50. What is the price of the at-the-money European put on the futures? Assume both the call and put have the same maturity. Question#2? An investor wishes to enter into a delta-neutral position with two options that, given the current price of the underlying asset, have the following prices and deltas: Option Price Delta A 14 -0.4300 B 14 +0.3300 Suppose an investor writes eight contracts of option A. To be delta neutral, how many contracts of option B should be traded? Should they be bought or sold? Question#3: Suppose that the current level of the S&P 500 index is 900, and the annual dividend yield on the index is 1.5%. The Treasury bills yield 5% per annum. Both rates are continuously compounded. What is the theoretical price of an S&P 500 futures contract with delivery in two months? Question#4: Suppose you are expecting the BCE stock to move substantially over the next three months. You are considering a butterfly spread. The current price of BCE stock is $40 per share. The three-month European call options on BCE stock, with strike prices of $30, $40 and $50, cost $7, $3 , and $2, respectively. Construct an appropriate butterfly spread.
Question 2
Case Study Part 2 Objective This case study looks at the behavior of a circuit board process through the use of control charts. At least two control charts will need to be constructed, and from them you will be asked to provide an assessment of what you see. A template to facilitate the construction of the control charts has been provided. You are not required to use this template. A tutorial that outlines the steps for this case is located in Doc Sharing. Problem Statement Fujiyama Electronics, Inc. has had difficulties with circuit boards purchased from an outside supplier. Unacceptable variability occurs between two drilled holes that are supposed to be 5 cm apart on the circuit boards. Thirty samples of four boards each were taken from shipments from the supplier as shown in the data from the worksheet. Data in the worksheet can also be assessed here Week 7 Case Study Tutorial. Guidelines The student will submit the completed case study in a Word document to the Dropbox by the end of class Week 7. The paper is worth 50 points. The student will complete and/or answer the following questions: 1. Calculate X-Bar-Bar, R-Bar, and associated control limits using the data in the table above. 2. Create X-Bar?R (Average & Range) Control Charts from the data in the table above. 3. Discuss notable out-of-control conditions displayed in the completed X-Bar?R (Average & Range) Control Charts. Only consider points outside the control limits. Do not consider runs, set of points within certain zones, and so forth. 4. If the conditions you note could be defined as assignable conditions, and they are removed from the process, then what will happen to the X-Bar?R Control Chart? 1. Remove the data related to the out-of-control points you observed from the original data, and recalculate new X-Bar-Bar, R-Bar, and associated control limits. 2. Create new X-Bar?R (Average & Range) Control Charts from your updated data. 5. Discuss how the two sets of Control Charts are different. What has changed? The format of the case study should conform to the Publication Manual for the American Psychological Association (APA), 6th edition, for the title page and text. Citations and references are not required. A basic APA tutorial can be found in the Webliography, and a paper template can be found in Doc Sharing. The completed case study will be submitted to your Dropbox as an MS Word document. All graphics and charts will be a part of the Word document and submitted as a file. Documents authored in other applications such as WordPerfect or MS Works will not be accepted. This project is to be accomplished individually, and it will reflect the work of each student. All DeVry University policies are in effect, including the plagiarism policy. Late papers will not be accepted without prior permission. Submit your Fujiyama Case Study paper to the Dropbox located on the silver tab at the top of this page by the end of Week 7. For instructions on how to use the Dropbox, read these Step-by-Step Instructions or watch this Dropbox Tutorial. See Syllabus "Due Dates for Assignments & Exams" for due date information. Grading Rubrics Category Points % Description First Control Chart 20 40% Description 5 All calculations are correct. 5 X-Bar & R charts are presented and correct. 10 All conditions of importance are discussed. Second Control Chart 20 40% Description 5 All calculations are correct. 5 X-Bar & R charts are presented and correct. 10 Differences between the two sets of control charts are thoroughly discussed. Mechanics 10 20% Description 2 The paper, including the title page, follows APA guidelines for format. (References and citations are not required.) 2 Sentences are complete, clear, and concise. 2 The paper is laid out with effective use of headings, font styles, and white space. 2 Rules of grammar, usage, and punctuation are followed. 2 Spelling is correct. Total 50 100% A quality paper will meet or exceed all of the above requirements. Best Practices The following are the best practices in preparing this paper. Sample papers, using the APA format, are located in Doc Sharing. Other useful information has also been provided there, including an APA paper template. ? Cover page: Include who you prepared the paper for, who prepared it, and the date. ? Body of your work: Use titles to identify different areas that you address. State the main ideas, major points in each idea, and supporting information. Break down each main idea you will use in the body of your paper. Show some type of division, like separate sections that are labeled, separate groups of paragraphs, or headers. You would include the information you found during your research and investigation. ? Summary and conclusion: Summarizing is similar to paraphrasing, but it presents the gist of the material in fewer words than the original. An effective summary identifies the main ideas and major support points from the body of your work. Minor details are left out. Additional hints on preparing the best possible project: o Apply a three-step process of writing: plan, write, and complete. o Prepare an outline of your research paper before you go forward. o Complete a first draft, and then go back to edit, evaluate, and make any changes required. o Use visual communication if it will help clarify and support your work. Any material that can be removed and not affect the clarity of your work is essentially filler and should be avoided. Filler distracts from the flow of your work and will most likely cause you to lose points. ? References: APA formatted references are required for this assignment.
Question 3
Tax Research Problem #1 Steve and Elaine Lostbucks have come to you for tax advice concerning the purchase of a condominium in Faulty Towers in Las Vegas for investment purposes. After reviewing the facts and alternatives below, prepare a memo outlining the tax effects of each alternative and recommend the strategy that will minimize their total tax liability. In your memo use references and citations to specific code sections or other supportive data. 1.Steve and Elaine are both 50 years old and anticipate that they will file a joint return have Adjusted Gross Income of $45,000 and no itemized deductions before considering any capital loss or deductions that will be generated by any of the alternatives. They are not real estate agents and this will be their first investment in investment real estate. 2. The purchase price of the condominium is $500,000 and the bank will finance $350,000 with an interest only payment of $3,000 per month. Property taxes will be $5,000 per year. 3. Due to the drastic drop in the Las Vegas real estate market, the condominium?s market value is $400,000 and they will not to be able rent it. 4. They have made deposits of $150,000 to the developer and will lose $75,000 of those deposits if they back out of the transaction. They are considering the following alternatives: A. Back out of the transaction and forfeit $75,000 of their deposits. They are not real estate agents and this will be their first investment in investment real estate B. Back out of the transaction and forfeit $75,000 of their deposits. They are not real estate agents but have acquired 6 other condominiums for investment in Las Vegas which they are currently leasing to tenants. C. Purchase the condominium (assume the bank will still make the loan) and sell the property as soon as possible for $400,000. They are not real estate agents and this will be their first investment in investment real estate D. Purchase the condominium (assume the bank will still make the loan) and list the condominium for rent and sell the property after one year for $400,000. They are not real estate agents but have acquired 6 other condominiums for investment in Las Vegas which they are currently leasing to tenants. E. Assume they selected alternative D but only sold the condominium for $275,000 and were not able to pay the bank the $75,000 shortfall. What would be the nature i.e. ordinary loss, capital loss etc. and amount of their loss? Would the transaction cause them to recognize ordinary income due to the forgiveness of debt?
Question 4
Imagine that you are the human resource manager for a small manufacturing company. You decide to invest in a materials resource planning (MRP) system. This is a computerized information system that improves efficiency by automating such work as planning needs for resources, ordering materials, and scheduling work on the shop floor. As the human resource manager you hope that with the new MRP system, the company can grow quickly and efficiently through the processing of small orders for a variety of products. You are also aware of the challenges to hire individuals with the technical skills needed to perform the job. Consider how the organization will address the skills deficiencies. Write a two to three (2-3) page paper in which you: Predict three (3) human resource functions that are likely to be affected by the implementation of an MRP system. Propose two (2) ways in which you as a human resource manager can help the organization carry out this change successfully. Determine three (3) human resource skills that would be important for success in leveraging the new MRP system. Based on the planned growth of the organization, predict three (3) factors that might impact the organization?s ability to hire new employees that possess the technical skills needed to perform a job. Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources. Your assignment must follow these formatting requirements: Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions. Include a cover page containing the title of the assignment, the student?s name, the professor?s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length. The specific course learning outcomes associated with this assignment are: Examine the theoretical constructs of human resource management. Analyze the external environmental factors that impact human resource policies and procedures. Use technology and information resources to research issues in human resource management foundations. Write clearly and concisely about human resource management foundations using proper writing mechanics ***Make sure you include citations within the paper from information you get from the 3 resources you use.
Question 5
A local youth group was contacted to provide concessions to the public and divide the profits with the Circular Club. The Auburn Circular Club Pro Rodeo Roundup would be held on June 1, 2, and 3. The cost of an adult ticket was set at $8 in advance or $10 at the gate; the cost of a ticket for a child 12 or younger was set at $6 in advance or $8 at the gate. Tickets were not date-specific. Rather, one ticket would admit an individual to one performance of his or her choice? Friday, Saturday, or Sunday. The rodeo committee was able to secure a location through the county supervisors board at a nominal cost to the Circular Club. The arrangement allowed the use of the county fair grounds and arena for a oneweek period. Several months prior to the rodeo, members of the rodeo committee had been assured that bleachers at the arena would hold 2,500 patrons. On Saturday night, paid attendance was 1,663, but all seats were filled due to poor gate controls. Attendance was 898 Friday and 769 on Sunday. The following revenue and expense figures relate to the first year of the rodeo. Receipts Contributions from sponsors $22,000 Receipts from ticket sales 28,971 Share of concession profits 1,513 Sale of programs 600 Total receipts $53,084 Expenses Livestock contractor 26,000 Prize money 21,000 Contestant hospitality 3,341* Sponsor signs for arena 1,900 Insurance 1,800 Ticket printing 1,050 Sanctioning fees 925 Entertainment 859 Judging fees 750 Port-a-potties 716 Rent 600 Hay for horses 538 Programs 500 Western hats to first 500 children 450 Hotel rooms for stock contractor 325 Utilities 300 Sand for arena 251 Miscellaneous fixed costs 105 Total expenses 61,410 Net loss $(8,326) *The club contracted with a local caterer to provide a tent and food for the contestants. The cost of the food was contingent on the number of contestants each evening. Information concerning the number of contestants and the costs incurred are as follows: Contestants Total Cost Friday 68 $ 998 Saturday 96 1,243 Sunday 83 1,100 $3,341 Illustration CA 5-1 Revenue and expense data, year 1 On Wednesday after the rodeo, members of the rodeo committee met to discuss and critique the rodeo. Jonathan Edmunds, CPA and President of the Circular Club, commented that the club did not lose money. Rather, Jonathan said, ?The club made an investment in the rodeo.? case 5 Cases for Management Decision Making CA-17 Instructions Answer each of the following questions. 1. Do you think it was necessary for Shelley Jones to stipulate that she wanted a fundraiser that would (1) continue to get better each year, (2) give back to the community, and (3) provide the club a presence in the community? Why or why not? 2. What did Jonathan Edmunds mean when he said the club had made an investment in the rodeo? 3. Is Jonathan?s comment concerning the investment consistent with Shelley?s idea that the club should have a fundraiser that would (1) continue to get better each year, (2) give back to the community, and (3) provide the club a presence in the community? Why or why not? 4. What do you believe is the behavior of the rodeo expenditures in relation to ticket sales? 5. Determine the fixed and variable cost components of the catering costs using the high-low method. 6. Assume you are elected chair of the rodeo committee for next year. What steps would you suggest the committee take to make the rodeo profitable? 7. Shelley, Jonathan, and Adrian Stein, the Fundraising Chairperson, are beginning to make plans for next year?s rodeo. Shelley believes that by negotiating with local feed stores, innkeepers, and other business owners, costs can be cut dramatically. Jonathan agrees. After carefully analyzing costs, Jonathan has estimated that the fixed expenses can be pared to approximately $51,000. In addition, Jonathan estimates that variable costs are 4% of total gross receipts. After talking with business owners who attended the rodeo, Adrian is confident that funds solicited from sponsors will increase. Adrian is comfortable in budgeting revenue from sponsors at $25,600. The local youth group is unwilling to provide concessions to the audience unless they receive all of the profits. Not having the personnel to staff the concession booth, members of the Circular Club reluctantly agree to let the youth group have 100% of the profits from the concessions. In addition, members of the rodeo committee, recognizing that the net income from programs was only $100, decide not to sell rodeo programs next year. Compute the break-even point in dollars of ticket sales assuming Adrian and Jonathan are correct in their assumptions. 8. Shelley has just learned that you are calculating the break-even point in dollars of ticket sales. She is still convinced that the Club can make a profit using the assumptions in number 7 above. (a) Calculate the dollars of ticket sales needed in order to earn a target profit of $6,000. (b) Calculate the dollars of ticket sales needed in order to earn a target profit of $12,000. 9. Are the facilities at the fairgrounds adequate to handle crowds needed to generate ticket revenues calculated in number 8 above to earn a $6,000 profit? Show calculations to support your answers. 10. Prepare a budgeted income statement for next year using the estimated revenues from sponsors and other assumptions in number 7 above. In addition, use ticket sales based on the target profit of $12,000 estimated in 8(b). The cost of the livestock contractor, prize money, sanctioning fees, entertainment, judging fees, rent, and utilities will remain the same next year. Changes in expenses include the following: Members of the Club have decided to eliminate all costs related to contestant hospitality by soliciting a tent and food for the contestants and taking care of the ?Contestant Hospitality Tent? themselves. The county has installed permanent restrooms at the arena, eliminating the need to rent port-apotties. The rodeo committee intends to pursue arrangements to have hotel rooms, hay, and children?s hats provided at no charge in exchange for sponsorships. The cost of banners varies with the number of sponsors. Signs and More charged the Circular Club $130 for each Exhibiting Sponsor banner and $48 for each Major Sponsor banner. At this time there is no way to know whether additional sponsors will be Exhibiting Sponsors or Major Sponsors. Therefore, for budgeting purposes you should increase the cost of the banners by the percentage increase in sponsor contributions. (Hint: Round CA-18 case 5 Cases for Management Decision Making all calculations to three decimal places.) By checking prices, the Circular Club will be able to obtain insurance providing essentially the same amount of coverage as this year for only $600. For the first rodeo the Club ordered 10,000 tickets. Realizing the constraints on available seating, the Club is ordering only 5,000 tickets for next year, and therefore its costs are reduced 50%. The sand for the arena for next year will be $300, and miscellaneous fixed costs are to be budgeted at $100. 11. A few members in the Circular Club do not want to continue with the annual rodeo. However, Shelley is insistent that the Club must continue to conduct the rodeo as an annual fundraiser. Shelley argues that she has spent hundreds of dollars on western boots, hats, and other items of clothing to wear to the rodeo. Are the expenses related to Shelley?s purchases of rodeo clothing relevant costs? Why or why not? 12. Rather than hire the local catering company to cater the Contestant Hospitality Tent, members of the Circular Club are considering asking Shady?s Bar-B-Q to cater the event in exchange for a $600 Major Sponsor spot. In addition, The Fun Shop, a local party supply business, will be asked to donate a tent to use for the event. The Fun Shop will also be given a $600 Major Sponsor spot. Several members of the Club are opposed to this consideration, arguing that the two Major Sponsor spots will take away from the money to be earned through other sponsors. Adrian Stein has explained to the members that the Major Sponsor signs for the arena cost only $48 each. In addition, there is more than enough room to display two additional sponsor signs. What would you encourage the Club to do concerning the Contestant Hospitality Tent? Would your answer be different if the arena were limited in the number of additional signs that could be displayed? What kind of cost would we consider in this situation that would not be found on a financial statement?
