1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Mumz [18]
3 years ago
15

Assume stock A costs $100 at t = 0 in a two-period world. There are two scenarios at t = 1: good and bad. In the good scenario t

he stock price rises to 120 dollars and in the bad scenario stock price declines to 70. The probability of both these scenarios is p = 0.5. The annual riskless rate is 10%. Your broker offers you a call option with strike price of $110 for $4.60. Will you take up his offer? Why or why not?
Business
1 answer:
Arada [10]3 years ago
3 0

Answer:

The offer at $4.60 by the broker is higher than the calculated fair value of $4.545 hence i will not take up his offer

Explanation:

Given data:

stock A = $100 at  t = 0  

in two worlds : good scenario ; stock A  = $120

                         bad scenario ; stock A = $70

probability = 0.5

annual risk less rate = 10% = 0.1

To determine if to take the offer or not we have to calculate the call option using the given parameters

Cu = \frac{(0.5*10) + (0.5*0)}{(1 + 0.10)}  = $4.545

The offer at $4.60 by the broker is higher than the calculated fair value of $4.545 hence i will not take up his offer

You might be interested in
The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A: Direct materials plac
Leokris [45]

Answer:

Total Cost of Job X4A:                                             $

Direct material cost  ($9,000 x 500 units)              4,500,000                              

Direct labour cost (300 hrs x $15 x 500 units )       2,250,000

Overhead applied (100 hrs x $22.50 x 500 units)  1,125,000

Total cost                                                                    7,875,000

Explanation:

The total cost of Job X4A is the aggregate of direct material cost, direct labour cost and overhead applied. Overhead is absorbed on the basis of machine hours. Thus, we will multiply the overhead rate by machine hours and number of units produced.          

7 0
3 years ago
A company has the following balances in its asset accounts: Cash, $750; Accounts Receivable, $125; Equipment, $2,000; Supplies,
SCORPION-xisa [38]
It would be, 750 + 125 + 2,000 + 875 so the company's total assets is  3,750$
Hope this helps!  
8 0
3 years ago
Read 2 more answers
Question 15 Multiple Choice Worth 5 points)
Fiesta28 [93]
Answer:

She filled for bankruptcy last year.
7 0
3 years ago
JOSEPH HAS TAKEN A SICK DAY, ALTHOUGH HE IS NOT ACTUALLY SICK. THIS IS AN EXAMPLE OF A DECISION THAT IS LEGAL, BUT NOT _____
Lyrx [107]

The correct answer would be, Ethical.

Joseph has taken a sick day, although he is not actually sick. This is an example of a decision that is legal but not Ethical.

Explanation:

Ethics are basically the moral principles that shape a person's behavior. This is something which tells us that how a person morally behaves in a situation.

In businesses, there are some code of conducts that are the rules and regulations, prescribed by the companies.

When a person violates a moral principle, it is called as the Ethical Violation. There is usually no legal action against the ethical violations, but it is not always the case. People may be charged for violating the code of conduct in organizations.

Decisions like taking a day off due to sickness when you are not actually sick is an example of decision which is legally right but ethically, it is totally wrong.

Learn more about Ethical Violations at:

brainly.com/question/13807907

#LearnWithBrainly

6 0
3 years ago
If the marginal damage caused by a certain type of pollution is $100 billion and the marginal cost of abatement is $180 billion,
Rom4ik [11]

Options :

A) society would be better off with zero pollution.

B) society would be better off if emissions were increased.

C) command and control policies should always be used.

D) Society would be better off if emissions were reduced

Answer:

Explanation: The marginal damage resulting from an emission refers to the extra damage resulting from the extra unit of emission released. Whereby the marginal cost of abatement refers to the cost incurred in reducing one extra unit of pollution. Taking a look at the cost of marginal damage incurred, which is $100billion and the marginal cost of abatement which is $180 billion. From an economic standpoint, aive the abatement cost considerably outweighs the marginal damage, it spending $180 billion to cover for a loss of $ 100 billion seems unreasonable. Therefore the society will be better off if emissions were increased.

8 0
3 years ago
Other questions:
  • Irene plans to retire on January 1, 2020. She has been preparing to retire by making annual deposits, starting on January 1, 198
    13·1 answer
  • A company inserts winning prize tickets into 10,000,000 of its products. 1 of the tickets is a large cash prize, 1,600,000 are s
    9·1 answer
  • In two to four sentences, explain economies of scale.
    8·1 answer
  • Xavier and Yolonda have original investments of $100,000 and $50,000 respectively in a partnership. The articles of partnership
    15·1 answer
  • Your brother is starting 9th grade next year and is thinking about going to college.
    10·1 answer
  • The following information is available: Units in process, Dec. 1 (60 percent converted) 2,000 units Units in process, Dec. 31 (5
    10·1 answer
  • Miller Mining, a calendar-year corporation, purchased the rights to a copper mine on July 1, Year 1. Of the total purchase price
    5·1 answer
  • just paid an annual dividend of $3.00 per share last year. Management just announced that future dividends will increase by 2 pe
    10·1 answer
  • A legal agreement that helps protect a lender if a borrower does not make required payments on notes or bonds is called a(n):
    11·1 answer
  • you normally stay at home on wednesday nights and study. however, next wednesday night, your best friend is having a big birthda
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!