Computing black-scholes price

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Reference no: EM1310220

1) Consider the following information, answer the following questions:

TR = $3Q
TC = $1,500 + $2Q

i) What is the break-even level of output?

ii) If the firm sells 1,300 units, determine its earnings or losses?

iii) If sales increase to 2,000 units, determine the firm’s earnings or losses?

iv) If total cost equation were TC = $2,000 + $1.80Q, what occurs to break-even level of output units?

2) Let a 9-month European call option with the strike price of= $40 on the stock that sells for $35 today. If annual risk-free rate (continuously compounded) is 8%, stock pays no dividends, and stock's annual volatility is 40%, then the Black-Scholes price for this option (rounded to the nearest cent) is?

Reference no: EM1310220

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