Concept 21.6-2 Option on assets of the firm
Fundamentals of Corporate Finance
Berk, DeMarzo, and Harford
05th Edition
A share of stock is a ______ option written on the assets of the firm with the strike equal to ___.
A share of stock is a ______ option written on the assets of the firm with the strike equal to ___.
Debt holders of a corporation can be thought of as owning the firm but having ___ a call option on the assets of the firm with the strike equal to ___.
Equity holders have the incentive to ___ the volatility of the firm, which is a cost to ___.
Identify the false statement regarding options.
Determine the delta of a one-year call option, the risk-neutral probability that Ragwort stock will rise, and if you would change your view about the value of the option.
Your numbers will vary.
Given the potential increase or decrease in the stock price, the current stock price and the interest rate, determine the value of a call option, the option delta, the amount to be invested in the stock and the amount to be borrowed.
Your numbers will vary.
Given the possible increase and decrease in stock price, the interest rate, and the current stock price… determine the break-even price along with whether the value will increase or decrease with a change in interest rate.
Your numbers will vary.
Determine the call value and the put value using the Black-Scholes formula given a monthly standard deviation and monthly risk-free rate.
Your numbers will vary.
Given the information from the treasurer of a major US firm… figure out how much the investment would be worth in the US vs Great Britain.
Your numbers will vary.
Given the information on the company’s imported motherboards from Singapore… figure out the profit on the current exchange rate, increased exchange rate, decreased exchange rate, the break-even exchange rate, and the percentage if it rises or falls.
Your numbers will vary.