Explain why this change affects the value of the option

Assignment Help Financial Management
Reference no: EM13943037

When changing the risk free rate from 3% to 6%, the option value changes from $7.16 to $8.33. Explain why this change affects the value of the option?

Reference no: EM13943037

Questions Cloud

Assignment-business start up proposal : Bill, a close friend of your parents wants to start a business. Your parents refer him to you since you are presently working on a technology related degree. In your first discussion, you discover the following facts:
Explain how this change affects the value of the option : If the original strike price of an option was $60 and the option was worth $7.16, then if the strike price changed to $65 dollars and the option lowered to $4.54. Explain how this change affects the value of the option?
Variance and the standard deviation of the portfolio : A portfolio is made up of 75% of stock GS and 25% of stock BAC. Stock GS has a variance of .08, and stock BAC has a variance of .035. The covariance between the stocks is -.001. Calculate both the variance and the standard deviation of the portfolio.
Select the minimum devices that you must install : In reference to part B above, what device should be uninstalled before you proceed with the entire installation, to protect this device from damage?
Explain why this change affects the value of the option : When changing the risk free rate from 3% to 6%, the option value changes from $7.16 to $8.33. Explain why this change affects the value of the option?
If interest rates rise the current value of bond will rise : If interest rates rise, the current value of the bond will rise. If interest rates fall, the face amount of a bond will remain the same. An investor may anticipate that a callable bond may be called If interest rates have fallen.
The retirement fund : You started working at the age of 32 and thanks to your finance Professor you had religiously invested $300 per month into a fund which was earning 9% per year. You are currently 42 years old and suddenly retirement at age of 65 seems closer than eve..
Construct a story about a fictional korean : Creative and construct a story (300~500words) about a fictional (or non-fictional) Korean that is living undocumented in Los Angeles
Estimate the compression factor for music. : The CPU of a video server has a utilization of 65%. How many movies can it show using RMS scheduling?

Reviews

Write a Review

Financial Management Questions & Answers

  Explain van buren common stock

On the basis of your answers to Problems 21-1 and 21-2, if Harrison were to acquire Van Buren what would be the range of possible prices it could bid for each share of Van Buren common stock?

  Comparing two different capital structures-equity plan

The NBA Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, NBA would have 200 shares of stock outstanding. Under Plan II, NBA would have 100 shares of stock and $5,000 in..

  Expects non normal dividend growth over the next three years

Louis incorporated expects non normal dividend growth over the next three years; that is a 10% growth rate in the first year, then 20%, and then 25% followed by growth of 5% thereafter. If the last dividend paid was $.25 and the appropriate discount ..

  What is the company net income

The Moore Corporation had operating income (EBIT) of $350,000. The company's depreciation expense is $70,000. Moore is 100% equity financed, and it faces a 35% tax rate. What is the company's net income?

  What is its self-supporting growth rate

Maggie's Muffins, Inc., generated $2,000,000 in sales during 2013, and its year-end total assets were $1,200,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..

  Straight supply straight supplystraight supply is a major

straight supply ltbrgt ltbrgtstraight supply is a major supplier of medical components to large pharmaceutical

  Weighted-average process costing to account for production

Victory Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. Instead of being 30% complete with respect to ..

  Theory about the use of nuclear weapons

Which of the following is a theory about the use of nuclear weapons?

  Initial fixed asset investment-zero salvage value

Consider a 10-year project with the following information: initial fixed asset investment = $480,000; straight-line depreciation to zero over the 10-year life; zero salvage value; price = $34; variable costs = $15; fixed costs = $206,400; quantity so..

  If the discount rate is infinite and zero

An investment has an installed cost of $535,800. The cash flows over the four-year life of the investment are projected to be $213,850, $230,450, $197,110, and $145,820. If the discount rate is infinite, what is the NPV?

  When evaluating the effect of a merger

When evaluating the effect of a merger, the European Union seeks to determine: the impact of the merger by a. totaling the total number of competitors left. b. amount of capital invested in the combined companies in relation to the remaining competit..

  Since its inception eco plastics company has been

since its inception eco plastics company has been revolutionizing plastic and trying to do its part to save the

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