What is the option value

Assignment Help Finance Basics
Reference no: EM132700916

The current price of a stock is $20, and at the end of one year its price will be either $23.50 or $15. The annual risk-free rate is 4.0% (use daily compounding with 365 days/year), based on daily compounding. A 1-year call option on the stock, with an exercise price of $18, is available. Based on the binominal model, what is the option's value?

Reference no: EM132700916

Questions Cloud

Identify where most change management plans fail : The first step in developing an organizational change management plan for your action research project, should be to identify where most change management plans
What is the weighted average cost of capital : What is the Weighted Average Cost of Capital given its tax rate is 32%? Ignore floatation costs.
What is the current equity value of x corp : Y Corp currently has 100 million shares on issue with a current price $30.00 per share What is the current equity value of X Corp?
What is the net present value : If the tax rate is 26% and the required rate of return is 18%, what is the net present value (NPV) of this project? (Answer to the nearest dollar.)
What is the option value : The current price of a stock is $20, and at the end of one year its price will be either $23.50 or $15. The annual risk-free rate is 4.0%
Construct a cash budget for a typical month : Construct a cash budget for a typical month and calculate the average cash gain or loss during the month.
Calculate the exodus increase in free cash flow : JB Hunt Corp. has annual sales of $80,000,000; its average inventory is $20,000,000; and its average accounts receivable is $16,000,000.
How many dollars will a euro buy in 60 days : Suppose one Euro can purchase 1.25 U.S. dollars today in the foreign exchange market, and currency forecasters predict that the Euro will depreciate
Find the price of stock to yield an effective : Find the price of this stock to yield an effective rate of 7% per year.

Reviews

Write a Review

Finance Basics Questions & Answers

  Suppose in the base year a typical market basket purchased

suppose in the base year a typical market basket purchased by an urban family cost 250. in year 1 the same market

  The adjusted balance method to find interest amount

Bernie and Pam Britten are a young married couple starting careers and establishing a household. They will each make about $50,000 next year and will have accumulated about $40,000 to invest.

  What is the minimum cash flow

10. What is the minimum cash flow that could be received at the end of year three to make the following project "acceptable?"  Initial cost = $100,000; cash flows at end of years one and two = $35,000; opportunity cost of capital = 10%.

  Calculate the annual compound growth rate of the house price

Calculate the annual compound growth rate of the house price during the period when the house was owned by Robert G. Goldstein (since 2007). (Round the number of years to the whole number). Please show your work.

  What will be the book value of the jets

Ten years ago, your company purchased a few corporate jets for $2,000,000. For tax purposes they will be fully depreciated over 20 years using the straight-line

  Develop and summarize an action plan for adams

Develop and summarize an action plan for Adams

  Determine the remainder of the budget

Drucker notes that the mission needs to translated and communicated in both profit and non-profit organizations. Such analysis will then provide everyone with the key monitoring of budgets to actuals so that they can measure their performance.

  Coupon payments and a face value

If this yield to maturity remains unchanged, what will be its price one year hence? Assume annual coupon payments and a face value of $100.

  What is the present and future equivalent of fuel costs

The annual fuel costs required to operate a solid-waste treatment plant are projected to be $3.7 million without considering any future inflation.

  What is the value of the abandonment option

What is the value of the abandonment option? What is Proposal B's differential risk-adjusted NPV? (Again, disregard the abandonment option.)

  Will this decrease in variable costs allow the company

Show your analysis. Assume that Nature House has identified ways to cut its variable costs to $1.15 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the company to achieve its target profit? Show your analysis.

  What is the expected capital gain or loss in basis point

The face value is $1000 and Selling 13% below par. What is the expected capital gain or loss in basis point?

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!

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