Calculate the intrinsic value of the call option

Assignment Help Financial Management
Reference no: EM131130403

A stock is currently selling for $83 per share. You could purchase a call with a strike price of $72 for $12. You could purchase a put with a strike price of $72 for $1. Calculate the intrinsic value of the call option.

Reference no: EM131130403

Questions Cloud

Improved bioequivalence assessment of topical dermatological : The article "Improved Bioequivalence Assessment of Topical Dermatological Drug Products Using Dermato pharmacokinetics" (B. N'Dri-Stempfer, W. Navidi, et al., Pharmaceutical Research, 2009:316-328) describes a study in which a new type of ointment..
Why do some communities become ambivalent to gangs : Why do some communities become ambivalent to gangs? What characteristics make gangs feel safe and how do communities contribute to this feeling?
What is the market price of bond : What is the market price of a bond that pays 5% coupons semiannually has a par value of $1000 and matures in 5 years when the market yields 7%?
What is the estimated cost of newly issued common stock : XYZ estimates that if it issues new common stock, the flotation cost will be 15%. XYZ incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost
Calculate the intrinsic value of the call option : A stock is currently selling for $83 per share. You could purchase a call with a strike price of $72 for $12. You could purchase a put with a strike price of $72 for $1. Calculate the intrinsic value of the call option.
Discusses the elaboration likelihood model of persuasion : Your textbook discusses the elaboration likelihood model of persuasion, which highlights two broad approaches in persuading people: a central route, based on logical argument; and, a peripheral route, which addresses elements not related to the me..
Does encouraging interfaith organizations among employees : If tolerance for and education about different religions seem to be the trend in today's workplace, why has the number of complaints filed with the EEOC raised steadily over the past 10 years?
European option on same asset with the same strike price : Employ an arbitrage argument to explain why an American option is always worth at least as much as: (a) a European option on the same asset with the same strike price and exercise date, and (b) its intrinsic value. For both parts (a) and (b) clearly ..
What would the loan balance be in five years : Say that you purchase a house for $210,000 by getting a mortgage for $185,000 and paying a $25,000 down payment. If you get a 15-year mortgage with a 6 percent interest rate, what are the monthly payments? What would the loan balance be in five years..

Reviews

Write a Review

Financial Management Questions & Answers

  Find duration of coupon bond making annual coupon payments

Find the duration of a 8% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 7.3%. What is the duration if the yield to maturity is 11.3%? (Do not round intermediate calculations.

  Determine whether high or low reserves are present

You are given a 50 percent probability that oil reserves (discounted revenues) are 80 million dollars and a 50 percent probability that oil reserves are 60 million dollars. It costs 50 million dollars to drill. Once a well is drilled, all drilling co..

  Operations and generate future sales and cash flows

Rivashes Fashion recently reported $10,750 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 35%. ..

  Truck is the best example of sunk cost

Valley Forge and Metal purchased a truck five years ago for local deliveries. Which one of the following costs related to this truck is the best example of a sunk cost? Assume the truck has a usable life of eight years.

  Calculate the price as present value of future cash flows

The trick here is just to calculate the price as the present value of future cash flows, just like in Chapter 6. Notice that the coupon payments) don't start immediately for one bond. You must adjust the present value equation for an annuity to refle..

  According to the liquidity preference hypothesis

An investor is considering investing for a five-year period using these two alternatives: (1) purchase a 5-year security, or (2) purchase a one-year security and “rolling over” into successive one-year securities over the next 5 years. According to t..

  Calculate the rate of return on equity of nodebt

Nodebt is a company with total assets of $100M and pays corporate taxes at the rate of 30%. Nodebt generates EBITs of $5M, $10M, $15M in a bad year, a normal year, and a good year respectively. Calculate the rate of return on equity of Nodebt in the ..

  Increase interest rates and lower the price of bonds

The Treasury currently had a $0.9 trillion dollar deficit in Fiscal 2013 so the US government was issuing new long term securities (borrowing to cover the deficit) at an average rate of $75 billion per month. This decreases the money supply which sho..

  What is the annual percentage rate on your account

You are paying an effective annual rate of 15.40 percent on your credit card. The interest is compounded monthly. What is the annual percentage rate on your account?

  Consider IKEAs return policy

Consider IKEA’s return policy: "If you’ve changed your mind and are not entirely satisfied with your purchase, simply return the unused item within 45 days for an exchange or refund." IKEA’s return policy represents:

  Indifferent between investing in corporate bond

Assume that Jose is indifferent between investing in a corporate bond that pays 10% interest and a stock with no growth potential that pays an 8% dividend yield. Assume that the tax rate on dividends is 15%. What is Jose's marginal tax rate?

  What is the companys cost of equity capital

Skillet Industries has a debt–equity ratio of 1.4. Its WACC is 9.8 percent, and its cost of debt is 7.5 percent. The corporate tax rate is 35 percent. What is the company’s cost of equity capital? What would the cost of equity be if the debt–equity r..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd