Intuition and Option Value suppose a share of stock sells for $75. The risk-free rate is 5
Question:
Intuition and Option Value suppose a share of stock sells for $75. The risk-free rate is 5 percent, and the stock price in one year will be either $85 or S95.
a. What is the value of a call option with a $85 exercise price?
b. What’s wrong here? What would you do?
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a The value of the call is the maximum of the stock price minus the present value of th...View the full answer
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Related Book For 
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th Edition
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
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