Question 1 : A 5-month call option contract on 100 shares of Home Depot common stock with a strike price of $59.95 can be purchased for $ 612. Assuming that the market price of Home Depot stock rises to $75.23 per share by the expiration date of the? option, what is the call? holder's profit? What is the holding period? return?
The profit this option would generate over the 5-month holding period is ?$916.
(Round to the nearest cent.)The 5 month holding period return is_____?%.
(Round to the nearest whole percent.)The annual holding period return is ______?%.
Question 2 : In the coming year, the Sandbergs expect a potential rental property investment costing? $120,000 to have gross potential rental income of $20,237?, vacancy and collection losses equaling 4?% of gross income, and operating expenses of $9,599.
The mortgage on the property is expected to require annual payments of ?$8,513.
The interest portion of the mortgage payments and the depreciation are given below for each of the next 3 years. The Sandbergs are in the? 25% marginal tax bracket.
|
Year
|
Interest
|
Depreciation
|
|
|
1
|
?$8,313
|
?$4,209
|
|
|
2
|
8,213
|
4,209
|
|
|
3
|
8,113
|
4,209
|
The net operating income is expected to increase by 6?% each year beyond the first year.
a. Calculate the net operating income? (NOI) for each of the next 3 years.
b. Calculate the? after-tax cash flow? (ATCF) for each of the next 3 years.