The share price of ABC plc will be either 2 or 1.5 at the end of the

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The share price of ABC plc will be either £2 or £1.5 at the end of the year. Call options are available with one year to expiration. UK government bond yields are currently at 3 per cent.

(a) Suppose the current share price of ABC plc is £1.74. What is the value of the call option if the exercise price is £1.75 per share?

(b) Suppose the exercise price is £1.9 in part (a). What is the value of the call option now?

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Corporate Finance

ISBN: 9780077173630

3rd Edition

Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe

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Question Posted: Feb 22, 2024 03:03 AM

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The share price of ABC plc will be either 2 or 1.5 at the end of the

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Corporate Finance

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