What would the equivalent annuity for this option be

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1. The price of the IBM call option for the exercise price of $96 is $2.00. What is the payoff per share for a long position in the option if the stock price at expiration date is $112.00?

$14.00

$18.00

$8.00

$16.00

$21.00

2. Equivalent annuities and growing perpetuities-Assume that the cost of the third-party storage option will increase 2.5% a year forever. What would the equivalent annuity for this option be? Explain your answer.

a). $2.05 million b). $2.78 million c). $2 million d). None of the above

 

Reference no: EM131983876

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