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OverLord2011 [107]
3 years ago
15

T-bills currently yield 5.0 percent. Stock in Danotos Manufacturing is currently selling for $87 per share. There is no possibil

ity that the stock will be worth less than $80 per share in one year.
Required:
a. What is the value of a call option with a $76 exercise price?
b. What is the intrinsic value?
c. What is the value of a call option with a $68 exercise price?
d. What is the intrinsic value?
e. What is the value of a put option with a $76 exercise price?
f. What is the intrinsic value?
Business
1 answer:
sladkih [1.3K]3 years ago
6 0

Answer:

a) Call option = Stock price - present value of the exercise price

= $87 – [$76 ÷ 1.05]

= $14.62

b) The intrinsic value is the amount by which the stock price exceeds the exercise price of the call, so the intrinsic value is

= $87 - $76

=$11

c) Call option = Stock price - present value of the exercise price

= $87 – [$68 ÷ 1.05]

= $22.24

d) The intrinsic value is the amount by which the stock price exceeds the exercise price of the call, so the intrinsic value is

= $87 - $68

=$ 19.

e) The value of the put option is $0 because there's no chance the put exhausts the money.

f) The intrinsic value is also $0

Explanation:

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Ashley Inc.’s total value is $950 million. Its balance sheet shows $100 million of accounts payable, $100 million of notes payab
PIT_PIT [208]

Answer: $7.50

Explanation:

Given that,

Total value = $950 million

Accounts payable = $100 million

Notes payable = $100 million

Long-term debt = $200 million

common equity = $200 million

shares of common stock = 100 million

Value of equity = Value of firm - Value of preferred stock - Value of long term debt.

                         = $950 million - 0 - $200 million

                         = $750 million

Value\ of\ stock = \frac{Value\ of\ equity}{Number\ of\ shares}

Value\ of\ stock = \frac{750}{100}

                                 = $7.50

                     

5 0
3 years ago
A standard "money demand" function used by macroeconomists has the form ln( ) = + ln( ) + m β , 0 β1 GDP β2R Where m is the quan
kvasek [131]

Answer:

1.The money demand will rise by 1.154%

2. The money demanded will fall and for a 1% increase in interest , the money demanded will fall by 0.38%

Explanation:

1. Money demand function

ln(m) = β0 +β1 ln(GDP)+β2R

Suppose β1 = 1.5 , β2 = −0.04 , GDP = $ 100 & R = 3%

ln(m) = 1.5 ln ($100) - 0.04 X 0.03

ln(m) = 6.91

m = 1002.247

Suppose the GDP increases by 1%; the new GDP will be = $ 101  

ln(m) = 1.5 ln ($101) - 0.04 X 0.03

ln(m) = 6.92

m = 1013.81

If the GDP increases by 1% ,the money demand will rise by 1.154%

2.

If the interest rate increases from 3% to 4%

ln(m) = 1.5 ln ($100) - 0.04 X 0.04  

ln(m) = 6.906155

m = $ 998.400

If the interest rate rises from 3% to 4% , the money demanded will fall and for a 1% increase in interest , the money demanded will fall by 0.38%

3 0
3 years ago
Consider a corrupt provincial government in which each housing inspector examines two newly built structures each week. All the
Anarel [89]

Answer:

a) If bribes cost $1,000 each, how much will a housing inspector make each year in bribes?

So, if the corrupt inspector approves two newly built structures each week, ti means that he is bribed twice per week. There are 52 weeks in a year, so he gets a total of 104 bribes (52 x 2). If each bribe costs $1,000, then he makes a total of: $1,000 x 104 = $104,000 in bribes per year.

c) Corrupt officials may have an incentive to reduce the provision of government services to help line their own pockets.

This statement is true. Corrupt officials will want to have private companies they can obtain bribes from provide government services. It increases the probability of them making money from bribes.

d) What if reducing the number of inspectors from 20 to 10 only increased the equilibrium bribe from $1,000 to $1,500?

Reducing the number of inspectors in hafl means that each inspector now gets twice the bribes. Because the equilibrium price did not double as did the quantity of bribes, each inspector will make less money than expected, but they will still the incentive to collect all the four bribes per week.

7 0
3 years ago
Hey yall, how yall doin?.....
Alex73 [517]
Heyy I’m doing ok lol. How are you doing? Anyone who sees this hope you have a great day!! :)
5 0
3 years ago
Read 2 more answers
Roads that function as expressways and divided highways have high speeds and greater risk of _________ crashes.
dimaraw [331]

Answer: High-impact crashes

Explanation:

High impact crashes are automobile crashes, that occurs at very high speeds and has a high likelihood to cause injuries and in some cases death to passengers of vehicles or pedestrians around.

Expressways and divided highways are roadways where vehicle drivers are allowed to drive at high speeds, therefore increasing the chances of high impact crashes occuring.

6 0
2 years ago
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