ABC Corporation plans to purchase a call option for 1,000 Red Corp. ordinary shares at a strike price of P489 per share. The contract will be exercisable four months from purchase. The details about the underlying asset are as follows: Market value per share 534.00 Volatility 10% Risk-free rate 3% If the call option is currently selling at P40,000, it is currently over or (under) valued by how much? Use 360 days in a year.
ABC Corporation plans to purchase a call option for 1,000 Red Corp. ordinary shares at a strike price of P489 per share. The contract will be exercisable four months from purchase. The details about the underlying asset are as follows: Market value per share 534.00 Volatility 10% Risk-free rate 3% If the call option is currently selling at P40,000, it is currently over or (under) valued by how much? Use 360 days in a year.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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ABC Corporation plans to purchase a call option for 1,000 Red Corp. ordinary shares at a strike price of P489 per share. The contract will be exercisable four months from purchase. The details about the underlying asset are as follows:
| Market value per share | 534.00 |
| Volatility | 10% |
| Risk-free rate | 3% |
If the call option is currently selling at P40,000, it is currently over or (under) valued by how much? Use 360 days in a year.
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