Transactions of a company involving external sources of funding are referred to as: Investing activities. Operating activities.
1 answer:
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Answer:
$9.86
Explanation:
Suppose there was no dividend, we can use the put-call formula
Making C subject of the formula,
where
C = call premium
P = put premium
X = strike price
r = annual interest rate
t = time (in years)
S = initial price of underlying
and get
C = 100 + 7 - 100 / 1.05
C = 107 - 95.24 = 11.76
Since there was a dividend of $2 power share at year-end, so the stock price will be 100 + 2 = 102.
Hence, we have the formula
C = 100 + 7 - 102 / 1.05
C = 107 - 97.14 = 9.86
$9.86 must be the price of a 1-year at-the-money European call option of the stock.