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3 years ago

The the existing spot price relative to the strike price, the valuable the call options will be.

Business

2 answers:

OLga [1]3 years ago

8 0

Answer:

The Higher the existing spot price relative to the strike price the more valuable the call options will be.

Explanation:

Spot price simply refers to how much a particular stock is trading in the market (that is, Market Price of the Stock).

Strike Price, also known as exercise price, is the price at which a person (corporate or individual) can purchase security.

Call options refers to the option to purchase an asset at an agreed price prior to/or at a particular day.

If for instance an employee is presented with Stock Options at a particular price, it will be more attractive for him or her if the price at which it is being offered is lower than it's actual market value. That way, he or she has already made a profit.

For example, if the spot price for the stock of Google is $2000/Unit and it is offered to an employee at $1450, if he elects to buy it at that time, he stands a chance to make $550 on each unit that if he sells whilst the spot price is still reasonable.

Cheers!

Brrunno [24]3 years ago

5 0

Answer:

The higher the existing spot price relative to the strike price, the less valuable the call options will be.

Explanation:

Call options refer to financial contracts in which the buyer of the option has the right, but not obligation, to buy asset or instrument at an already agreed price on or before a particular date. The particular date is also known as the expiration date.

The strike price is refers to the price at which a put or call option can be exercised on or before a particular date.

The spot price refers the current market price at which an instrument or asset is bought or sold now for immediate payment and delivery.

The relationship between the strike price and the spot price is that a call option is most valuable when the strike price is higher than the spot price. At this point, the call option is said to be in the money (ITM). On the other hand, a call option is least valuable when the strike price is lower than the spot price. At this point, the call option is said to be out of the money (OTM).

Based on the explantion above, therefore, the higher the existing spot price relative to the strike price, the less valuable the call options will be.

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3 years ago

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julia-pushkina [17]

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2 years ago

The Jackson-Timberlake Wardrobe Co. just paid a dividend of $2.15 per share on its stock. The dividends are expected to grow at

tekilochka [14]

Answer:

$34.4

$37.20

c) $59.57

Explanation:

Given:

Dividend paid = $2.15

Growth rate = 4% = 0.04

Required return = 10.5% = 0.105

Now,

a) Present value = $\frac{\textup{Dividend paid}\times\textup{(1 +growth rate)}^n}{\textup{(Required return-Growth rate)}}$

for the current price n = 1

thus,

Current price = $\frac{\textup{Dividend paid}\times\textup{(1+growth rate)}^n}{\textup{(Required return-Growth rate)}}$

= $\frac{\textup{2.15}\times\textup{(1 +0.04)}^1}{\textup{(0.105-0.04)}}$

= $34.4

b) Price in 3 years

i.e n = 3

= $\frac{\textup{Dividend paid}\times\textup{(1 +growth rate)}^n}{\textup{(Required return-Growth rate)}}$

= $\frac{\textup{2.15}\times\textup{(1 +0.04)}^3}{\textup{(0.105-0.04)}}$

$37.20

c) Price in 15 years

i.e n = 15

= $\frac{\textup{Dividend paid}\times\textup{(1 +growth rate)}^n}{\textup{(Required return-Growth rate)}}$

= $\frac{\textup{2.15}\times\textup{(1 +0.04)}^{15}}{\textup{(0.105-0.04)}}$

= $59.57

4 0

3 years ago

Which staff member usually does the work of both a front desk clerk and an accounting clerk?

fomenos

D for sure is the correct answer

8 0

3 years ago

A marketing manager has just estimated that her firm's marginal revenue will become negative if a proposed price cut is made.

Viktor [21]

Answer:

D. More Units may be sold - but total revenue will be less than it would be at the higher price

Explanation:

Marginal Revenue (MR) represents the additional revenue that can be obtained if sales of a product are increased by one unit.

MR= is change in Total Revenue/Change in Total Output Quantity

In this situation as envisaged by the Marketing Manager, a price cut will lead to an increase in revenue based on more (marginal) units of the product sold at a lower price. The challenge, however, is that this increase in income will not be enough to offset the decrease in revenue that will result as a result of the price cut.

In other words, the organisation is better off selling fewer products or units at its current price than sell more (marginal units) at a reduced price.

7 0

3 years ago

The ____ the existing spot price relative to the strike price, the ____ valuable the call options will be.

The the existing spot price relative to the strike price, the valuable the call options will be.