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Citrus2011 [14]
3 years ago
12

A one-year call option contract on Cheesy Poofs Co. stock sells for $1,250. In one year, the stock will be worth $57 or $78 per

share. The exercise price on the call option is $70. What is the current value of the stock if the risk-free rate is 2 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Business
1 answer:
ale4655 [162]3 years ago
5 0

Answer:

Value of call option = 3.92

Explanation:

Stock price - Exercise price, 0

When share price is $57,

Payoff = Max (57 - 70, 0)

Payoff = Max (-13, 0)

Payoff = 0

When share price is $78

Payoff = Max (78 - 70, 0)

Payoff = Max (8, 0)

Payoff = 8

Value of call option = (Expected payoff * Probaliltiy) / (1 + Interest for the period)

Considering probability as 50% for each stock

Value of call option = (0 * 0.5 + 8 * 0.5) / (1 + 0.02)

Value of call option = 3.92

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quester [9]

Answer:With unbounded message transmission time, clock differences are necessarily unbounded.

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3 years ago
In computing depreciation, salvage value isa. the fair market value of a plant asset on the date of acquisition.b. subtracted fr
kirill115 [55]

Answer:

c. an estimate of a plant asset's value at the end of its useful life

Explanation:

The salvage value or the residual value is the estimated value of the fixed asset which can be received at the end of its useful life. So, neither it is a fair market value of a plant asset , nor it is deducted from the accumulated depreciation.

The treatment of the residual value under the straight-line method or any other method is shown below:

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5 0
3 years ago
Suppose that widgets are produced by a monopolistically competitive industry. If each firm in this market has the same cost stru
natulia [17]

Answer:

The equilibrium number of firms is 20.

Explanation:

Q = SH × b

   = 2,400 × (1/20)

   = 2,400 × 0.05

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Also given, Q = S / n

                120 = 2,400 / n

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3 0
3 years ago
Daphne, a victim of identity theft, can’t currently qualify for a loan but wants to buy her friend’s condo for $90,000. She coul
stiks02 [169]

Answer:

<em>an option agreement. </em>

Explanation:

The <em>option agreement</em> in the arena of financial derivatives <em>is a contract between two parties that gives one party the right, but not the obligation, to buy an asset from the other party or to sell an asset to the other</em>.

It outlines the agreed-upon price and the transaction's future date.

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3 years ago
If the market price ​'Pmkt​' is above the price ​'P0​', then quantity supplied is_________ equal to greater than quantity demand
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The quantity supplied at this level of price is less than the quantity demanded and therefore the market is in shortage situation.

<u>Explanation:</u>

If the current price of the market is above the price P0, then the level of the quantity supplied of the good is less than the level of quantity demanded of that good at this level. With the less quantity supplied, there will be a situation of shortage of the quantity of goods in the market.

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3 years ago
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