User Account

All Pages

What is the annual volatility to use for option valuation

Assignment Help Accounting Basics
Reference no: EM133089868

Question - Boeing plans to give American Airlines (AA) an option to buy wide-body 9W9 aircraft at the end of three years for $200 million, and the price of 9W9 aircraft today is $180 million. The life of the aircraft is 20 years. Boeing's business consists of 50% in commercial aircraft and 50% in defense projects. The volatility for Boeing stock is 3% per month. Airbus is 100% in the commercial aircraft business. The volatility for Airbus stock is 5% per month. The 3-year risk-free rate is 3% per year, and the twenty-year rate is 5% per year. What is the annual volatility to use for the option valuation (%/Yr.)?

Reference no: EM133089868

Questions Cloud

Case engineering an inclusive bioeconomy : 1. What was Castilla-Rubio's motivation for attempting to start Earth Bank of Codes (EBC)? What is the vision and business model?
What entries would be accounted for in income statement : If the grant were to be show separately as deferred income, what entries would be accounted for in Income Statement in year 1
Understand the type and scale of the risk : Terry has worked at a community respite centre for people with disabilities for three years. It is his first night working with Lin, a new resident who has auti
Matshushita professor of leadership : Globalization and constant innovation of technology result in constantly evolving business environment. Phenomena such as social media and mobile adaptability h
What is the annual volatility to use for option valuation : The 3-year risk-free rate is 3% per year, and the twenty-year rate is 5% per year. What is the annual volatility to use for the option valuation (%/Yr.)
What are the three issues with big data : What are the THREE issues with Big Data? Explain briefly. (3 for each issue and 10 marks for full answer)
Administrative and financial decisions for the organization : Assuming you are employed as a retail manager, how comfortable would you be making administrative and financial decisions for the organization you might work fo
How many units must be sold this year : SN Manufacturing sells its product for $40 per unit. How many units must be sold this year to earn a pre-tax profit of $45,000 if variable costs increase by 10%
Explain the concept of integrated marketing communications : You work for a tour operator who is creating an integrated marketing campaign in order to promote their Italy packages and increase sales. Please answer the fol

Reviews

Write a Review

Accounting Basics Questions & Answers

  Prepare journal entries to record the inception of contract

Prepare journal entries to record the inception of the contract, the change in its fair value at year-end and the additional margin payment, and its maturity

  Why is a memorandum used as the source document

What journal is used to record transactions that cannot be recorded in special journals?

  What is the latest date that Jared can replace the office

If the insurance settlement was $950,000 (received March 1, 2021), what is the latest date that Jared can replace the office building to qualify

  Each option entitles the holder to purchase one share

On January 1, 2010, Bar wood Corporation granted 5,000 options to executives.

  Compute the standard direct materials cost per unit

Perfect Pet Collar Company makes custom leather pet collars. Compute the standard direct materials cost per unit

  How much is paid for the dividends

How much is paid for the dividends and how much retained earnings is reduced by dividends in the year 20X2

  Method of determining pension benefits

Pension accounting has become more closely associated with the method of determining pension benefits.

  Maxiflow and alaska assuming

Compute the departmental overhead rates using machine hours as the cost driver.Compute a company-wide overhead rate using machine hours as the cost driver.Compute the overhead costs per batch of MaxiFlow and Alaska assuming:

  Provide the necessary journal entries

During 2019 Gem Limited explores three areas and incurs the following costs: Provide the necessary journal entries using the area-of-interest method

  What is the return on investment for the investment center

Last year, the investment center's ROI was 12.2%. What is the return on investment for the investment center for the current year

  Draft the email for helen in response to michael question

ACCT3004 Accounting Theory and Analysis Assessment. Draft the email for Helen in response to Michael's question

  Information technology for competitive advantage

Compare each organization's use of information systems to help manage internal operations and to make decisions. Assess how these two organizations use information technology for competitive advantage.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd