Today is Tuesday, March 26, 2013 and the price of Lemon Car Dealership Inc. (LCD) stock...
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Today is Tuesday, March 26, 2013 and the price of Lemon Car Dealership Inc. (LCD) stock is $156.12. Your broker tells you that you could buy/sell a call option on LCD with a strike price of $180.00 and 156 days until maturity for $8.00. Your research indicates that the variance of LCD's annual stock returns is 0.15 and you know that the continuously compounded risk-free rate is 3%. Assume LCD does not pay any dividends, and that one year is exactly 365 days long. Would you be willing to write such an option for the price quoted by your broker (i.e.. $8.00)? Round d, and d, to the nearest values in the cumulative normal distribution table (you find such a table in your textbook or under "Resources" on the course website). No interpolation of N(d) is required. Would you be willing to write such an option for the price quoted by your broker (i.e., $8.00)? Today is Tuesday, March 26, 2013 and the price of Lemon Car Dealership Inc. (LCD) stock is $156.12. Your broker tells you that you could buy/sell a call option on LCD with a strike price of $180.00 and 156 days until maturity for $8.00. Your research indicates that the variance of LCD's annual stock returns is 0.15 and you know that the continuously compounded risk-free rate is 3%. Assume LCD does not pay any dividends, and that one year is exactly 365 days long. Would you be willing to write such an option for the price quoted by your broker (i.e.. $8.00)? Round d, and d, to the nearest values in the cumulative normal distribution table (you find such a table in your textbook or under "Resources" on the course website). No interpolation of N(d) is required. Would you be willing to write such an option for the price quoted by your broker (i.e., $8.00)?
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To determine whether we would be willing to write the call option for the price quoted by our broker ... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Posted Date:
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