If the current closing price in the stock of XYZ, Inc. is $87.50 and the July expiration put options with a strike price of $80 are selling for $1.05, what is the intrinsic value of the option? What is the option premium?
What will be an ideal response?
The intrinsic value of a put option is the strike price less the market price, which in this case is a negative $7.50. An option cannot have an intrinsic value less than zero, however, since the option does not have to be exercised. So in this case the intrinsic value is zero. The option premium is the option price less the intrinsic value, so the option premium is $1.05.
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In growth theory, the change in a country's standard of living is measured by the change in
A) employment. B) the nation's capital stock. C) wages per person. D) real GDP. E) real GDP per person.
Which of the following is not an appropriate policy for a central bank to follow if the economy is plagued with deflation?
A) consistently pursuing policy to promote the credibility of the central bank B) explicitly and credibly targeting inflation C) using expansionary monetary policy to drive down interest rates D) increasing the target interest rate on overnight loans
Where does the interest rate fit into the accelerator hypothesis of investment?
A) It helps determine the error-learning parameter, j. B) It helps determine the ratio of desired capital to expected sales, v*. C) It helps determine the depreciation ratio of capital stock to replacement investment. D) Nowhere: the hypothesis says that investment is independent of the interest rate.
The above table depicts output from a firm that manufactures computers. The computers sell for $1,000 each. What is the marginal revenue product (MRP) for the fourteenth worker per week?
A) 90 units B) 80 units C) $70,000 D) $60,000