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enyata [817]
3 years ago
9

A one-year call option contract on Cheesy Poofs Co. stock sells for $1,330. In one year, the stock will be worth $65 or $86 per

share. The exercise price on the call option is $78. What is the current value of the stock if the risk-free rate is 3 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Business
1 answer:
givi [52]3 years ago
6 0

Answer:

$98.02

Explanation:

Data provided in the question:

Value of contract = $1,330

Maximum value = $86

Minimum value = $65

Exercise price = $78

Risk-free rate = 3%

Now,

Current value of stock = (\frac{\text{Maximum value-Minimum value}}{\text{Maximum value-Exercise price}}\times\text{Call price})+(\frac{\text{Maximum value }}{\text{1+Risk-free rate}})

also,

a standard contract has 100 shares

thus,

Call price = Value of contract ÷ 100 shares

or

Call price = $1,330 ÷ 100  = $13.30

Thus,

Current value of stock = (\frac{\text{86-65}}{\text{86-78}}\times\text{13.30})+(\frac{\text{86}}{\text{1+0.03}})

or

Current value of stock = ( 2.625 × $13.30 ) + $63.1068

= $98.0193 ≈ $98.02

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Answer:

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Provided information

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Microsoft profit = $21.5

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On January 1, 2021, Kendall Inc. began construction of an automated cattle feeder system. The system was finished and ready for
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Answer:

The correct answer is "$21490".

Explanation:

The given expenditures are:

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= 205000 ($)

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3 0
3 years ago
Ashley bought a desktop computer and a laptop computer. Before finance charges, the laptop cost $350 more than the desktop. She
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Answer:

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Explanation:

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<u>Workings</u>

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