Find the amount of money that went to jay and to demsey

Reference no: EM13262694

Jay and Demsey bought Smugglers Notch Company for $5 million by investing $2.5 million each. Jay was a stockholder, and thus the owner of the company. The corporation agreed to pay Demsey $5 million after ten years for his share of the business. However, by mutual agreement, they sold the business after 6 years for $8 million and divided the money according to the option pricing theory. The riskless rate at the time was 3.1%, and the sigma of Smugglers Notch Company was 0.55. Find the amount of money that went to Jay and to Demsey.

Reference no: EM13262694

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