Which of the following is a way of extending the Black-Scholes-Merton formula to value a European call option on a stock paying a single dividend?
A. Reduce the maturity of the option so that it equals the time of the dividend
B. Subtract the dividend from the stock price
C. Add the dividend to the stock price
D. Subtract the present value of the dividend from the stock price
D
To value a European option we replace the stock price by the stock price minus the present value of all dividends that have ex-dividend dates during the life of the option.
You might also like to view...
Jimmy, the marketing manager for an automobile manufacturer, observes frequent conflicts between two of his subordinates, Trent and Luke. He asks the human resource department to help, and the department's training manager, Emily, investigates. She tells Jimmy that the two subordinates lack interpersonal communication skills but would be likely to improve with proper training. This scenario suggests that Emily has conducted a(n)
A. instructional analysis. B. organization analysis. C. institutional analysis. D. person analysis. E. market analysis.
Changes in working capital are considered insignificant and thus ignored when considering capital projects
Indicate whether the statement is true or false.
The production department of Tarre Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year. 1st Quarter2nd Quarter3rd Quarter4th QuarterUnits to be produced10,00012,00011,00010,500?Each unit requires 0.30 direct labor-hours at $16.00 per hour.Required:?Prepare a direct labor budget for the upcoming fiscal year, assuming that the direct labor work force is adjusted each quarter to match the number of hours required to produce the budgeted production.
What will be an ideal response?
A) stock's susceptibility to poor performance due to weak stock market conditions B) an option to purchase or sell stocks under specified conditions C) right to purchase 100 shares of a specific stock at a specific price by a specific date
D) REITs that invest money directly in properties E) debt securities 45) stock option 46) equity REITs 47) call option 48) bonds 49) market risk What will be an ideal response?