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Calculate and compare the risk od investments

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Question: Your company has just awarded you a generous stock option scheme. You suspect that the board will either decide to increase the dividend or announce a stock repurchase program. Which do you secretly hope they will decide? Explain.

Calculate and compare the risk (betas) of the following investments:

(a) a share of Google stock;

(b) a one-year call option on Google;

(c) a one-year put option;

(d) a portfolio consisting of a share of Google stock and a one-year put option;

(e) a portfolio consisting of a share of Google stock, a one-year put option, and the sale of a one-year call.

In each case assume that the exercise price of the option is $430, which is also the current price of Google stock.

Reference no: EM131750891

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