A customer owns a 5 ABC convertible bonds, convertible into common stock at a 20:1 ratio. The common stock is currently trading at $29. The customer believes that the stock will rise during the next 6 months, but does not think that it will rise above $45 per share. The customer wishes to use options to profit from his belief, but wishes to minimize any additional capital outlay. Which strategy is the best recommendation to the customer

Options

A. Buy 1 ABC Jan 45 Call

B. Sell 1 ABC Jan 45 Call

C. Buy 1 ABC Jan 45 Put

D. Sell 1 ABC Jan 45 Put

B. Sell 1 ABC Jan 45 Call

Explanation:

It's believed by the customer that the stock will likely increase from $29 per share though it won't increase more than $45 per share.

Any option that supports buying strategy will not meet the customer's specifications, because of its money outlay requirements.

As the holder of a convertible bond that the customer is, the convertible at $50 per share wouldn't be advisable to convert, even if the price rose to $45. But, the customer can use the convertible bond to "cover" the sale of call contracts against the stock.

Also because each bond is convertible at 20:1, this means that 5 bonds is the equivalent of 100 shares of stock.

By selling an ABC Jan 45 Call, the customer collects the premium income, and has no capital outlay since the short call is covered.

answer; i believe the correct answer is (4) flip a coin as each participant arrives,heads indicates assignment to the first group: tails indicates assignment to the second group;

answer:

d. because dr. laguardia selected a widely used measure, his study generalizes to has strong external validity. external validity has limited external validity. other applications of this measure.

the widely used measure that he applied to his experiment was the benton facial recognition test. it employed on to football players and as result, only players who suffered brain concussions did not pas this test. and although it has an external validity, it is limited because it isn't general to apply to other population.