Calculate the exercise value of the option

Assignment Help Basic Statistics
Reference no: EM131660591

Question: Lilah Corporation's stock is selling for $55 per share.  An investor is considering buying a call option with an exercise price of $60. The investor is willing to pay the premium of 50 cents per option.   

a. Calculate the exercise value of the option? 

b. Why is an investor willing to pay 50 cents an option when the stock is going for $55?

c. Calculate the exercise value if the price of the stock increases to $62 per share.

d. What is the difference between a put option and a call option?

e. If the exercise price for both the call option and the put option is $60, which will have a higher premium if the underlying stock price falls to $50 per share? Why?

Reference no: EM131660591

Questions Cloud

Describe a significant nursing clinical issue : Describe a Significant Nursing Clinical Issue, nursing clinical issue that you would like to search for evidence in online sources
What is the balance of retained earnings : On May 30, 2013, the company declared and paid dividends in the amount of $3,500. What is the balance of retained earnings as at May 31, 2013
Initial value of a forward contract : Prove the initial value of a forward contract at the beginning of the contract (where t = 0)?
Is davidson masonry member managed or manager managed : Lafayette designed numerous metal salmon sculptures that were incorporated into colorful decorative concrete forms designed by Rowe.
Calculate the exercise value of the option : An investor is considering buying a call option with an exercise price of $60. The investor is willing to pay the premium of 50 cents per option.
How the company aligns its benefits with its corporate value : How the company aligns its benefits with its corporate values? How the company uses its own products or services to enhance the total compensation?
Calculate ending retained earnings : The company did not pay any dividends during this period. Calculate ending retained earnings. Do not enter dollar signs or commas in the input boxes
Evaluate the tax considerations : Determine the number of participants, the forms a state allows, and the limits on liability the state provides for the participants.
Payment reduce the principal : i. What will your quarterly payment be if you sign up for this mortgage? ii. How much does your first payment reduce the principal?

Reviews

Write a Review

Basic Statistics Questions & Answers

  Find probability that more than fifty percent voted yes

Sample of 1500 voters was taken and the number who are voting yes is recorded. What is the probability that more than 50% of those 1500 vote yes?

  Test the hypothesis that two variances are equal

For the samples summarized below, test the hypothesis that the two variances are equal, at α = 0.05

  Explain characteristics as the central limit theorem

Why do so many of life's events share the same characteristics as the central limit theorem? Why are estimations and confidence intervals important?

  The value of twitter has been growing exponentially at a

the value of twitter has been growing exponentially at a rate of 150 a year. if the company was worth 0.5 million in

  Probability that operator will get live answers on calls

There is an operator at the center who places 25 outgoing calls in a one-hour period. What is the probability that this operator will get live answers on 7 or more calls?

  Inheritance of $10,000

You have just received an inheritance of $10,000 and you decide that you should invest the money rather than blow it on frivolous items.

  It is known that the standard deviation of the population

the average price of homes sold in the u.s. in the past year was 220000. a random sample of 81 homes sold this year

  How many license plates meet the witness description

In Oregon, standard license plates consist of3 letters (there are 26 in the alphabet followed by 3 digits 9). Assume there are no other letters restrictions.

  Learned about hypothesis testing

Use what you have learned about hypothesis testing to answer the following questions.

  Round your computed test statistic to two decimal places

a pharmaceutical company is checking their medicines according to the regulations imposed. the company must ensure that

  Discuss your conclusions about this manufacturing process

an electrical engineer is reporting one the results for a process that manufactures high-voltage supplies with a

  Life expectancies for men and women were measured by

life expectancies for men and women were measured by country. it was found that the average male life expectancy was

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd