Consider two american put options on the same stock

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Reference no: EM131972696

1. Consider two American put options on the same stock with the same maturity but different strike prices $40 and $50. Which of the following statements is correct?

The 40-strike put option is more expensive

The 50-strike put option is more expensive

The two options should have the same premium

It is unclear which option should be more valuable

2. The following facts are presented on an opportunity to invest in Machine A: Cost of equipment is $ 200,000. The machine has an excepted 4-year useful life; it will be depreciated according to 3- year Modified Accelerated Cost Recovery System( MACRS).

Reference no: EM131972696

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