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The price of Build A Fire Corp. stock will be either $65 or $92 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 3 percent.
a. Suppose the current price of the company's stock is $72. What is the value of the call option if the exercise price is $60 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Value of the call option $
b. Suppose the exercise price is $85 and the current price of the company's stock is $72. What is the value of the call option now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Value of the call option
The stock price of Webber Co. is $53.80. Investors require a return of 12 percent on similar stocks. If the company plans to pay a dividend of $3.55 next year, what growth rate is expected for the company’s stock price?
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