Question: Please help me answer these questions asap! 4. Given a current dividend of $4.00 (just paid), a required rate of return of 8% and a
Please help me answer these questions asap!
4. Given a current dividend of $4.00 (just paid), a required rate of return of 8% and a dividend growth rate (g) of 2% for 10 years, compute the current value of the stock.
66.67
68
29.02
29.61
5. Assume an initial underlying stock price of $20, an exercise price of $20, a time to expiration of 3 months, a risk free rate of 12% and a underlying stock return variance of 16%. If the time to expiration increased to 6 months and assuming other variables are held constant, the call option value would
increase
remain the same
decrease
indeterminate from the information given
6. Which of the following call option determinants has a positive relationship with the call option value.
underlying stock return volatility
time to expiration
risk free rate
all of the above
7. Assume an initial underlying stock price of $20, an exercise price of $20, a time to expiration of 3 months, a risk free rate of 12% and a underlying stock return variance of 16%. If the underlying stock price decreased to $15 and assuming other variables are held constant, the call option value would
increase
remain the same
decrease
indeterminate from the information given
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