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Find what is the intrinsic value of the option

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Reference no: EM132584782

Question 1: Curt Jones purchases a Call Option on IDM for $3.00. The option's strike price (X) is $55. Assuming IDM's current stock price (S) is $45, what is the intrinsic value of the option?

A. $0.00

B. -$13.00

C. $10.00

D. -$10.00

Question 2: Sand 5th Avenue borrows $350 million from Trust Bank. It invests $250 million in a new generator and uses the rest, $100 million, to invest in high-yield Certificate of Deposit. What is the impact of this transaction on Sand's balance sheet?

A. Assets increase by $250 million

B. Shareholder equity increases by $100 million

C. Net income increases by $100 million

D. Liabilities increase by $350 million

Question 3: A security's total risk is composed of its___ and ___

A. Beta and idiosyncratic risk

B. Beta and market risk

C. Specific risk and firm-specific risk

D. Aggressive risk and defensive risk

Question 4: Which of the following actions will increase a firm's cash balance, all else equal.

A. Purchase of a new equipment

B. Issuance of debt

C. A decrease in accounts payable

D. An increase in inventory

Question 5: What is the most likely explanation for a 30% return on a stock with a beta of 1.0 in a month when the market returned 12.5%?

A. The market is undervalued

B. The stock is aggressive

C. The beta is really 0.5

D. Favorable firm-specific (idiosyncratic) news was reported

Question 6: To calculate the present value of a business, the firm's free cash flows should be discounted at the firm's

A. Pre-tax cost of debt

B. Weighted-average cost of capital

C. CAPM-derived cost of equity

D. Weighted-average cost of debt

Reference no: EM132584782

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