Question: Q. Sarah limited has a liability with a face value of $100,000 due in one year. The assets of the firm are currently worth $300,000.

Sarah limited has a liability with a face value of $100,000 due in one year. The assets of the firm are currently worth $300,000. The shareholders in this firm basically own a __ option on the assets of the firm with a strike price of __.

a) put; $180,000.

b) put; $265,000.

c) warrant; $300,000.

d) call; $100,000.

e) call; $300,000.

Mohammed is all-equity firm that has 3,000 shares outstanding at a market price of $7.5 a share. Ahmad firm has 3,200 shares outstanding at a price of $28 a share. Ahmad firm is acquiring Khaled firm for $24,000 in cash. What is the merger premium per share? (choose more than 1 answer)

a) $1.25.

b) $0.75.

c) $0.5

d) None of the above.

A call option with an exercise price of $31 and 6 months to expiration has a price of $2.67. The stock is currently priced at $6.99, and the risk-free rate is 3 percent per year, compounded continuously. What is the price of a put option with the same exercise price and expiration date?

A $1,000 convertible debenture has a conversion price for common stock of $85 per share. The common stock is selling at $92 a share. What is the conversion value of this bond? ANSWER: 1,082.35

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