Find the initial value of the investment-including options

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Reference no: EM13918385

Kasugai Corporation bought 350 shares of AIG stock at $49.30 per share. At the same time, it sold call options on 200 shares with exercise price $50.00, expiring after 72 days, at $3.50 per share. Kasugai also sold calls on 100 shares, with exercise price $55.00, maturing after 72 days, at $1.25 per share. When the options expired, the stock was trading at $54.30 per share. Ignore transaction costs and dividends. Find the initial value of the investment, including options ($16,430), the final value of the investment ($18,145), the profit in this investment (the difference of final & initial investments), and the risk-adjusted discount rate in this investment is 8%. Using continuous discounting, find the NPV of this investment.( $1,430.90).

Reference no: EM13918385

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Find the initial value of the investment-including options : Kasugai Corporation bought 350 shares of AIG stock at $49.30 per share. At the same time, it sold call options on 200 shares with exercise price $50.00, expiring after 72 days, at $3.50 per share. Kasugai also sold calls on 100 shares, with exercise ..

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