. Now assume that the effective annual interest rate is 6.70%, which corresponds to a monthly interest rate of 0.54%. Calculate the present value of each call option's exercise price and the adjusted intrinsic value for each call option. (Do not round your intermediat calculations and round your final answers to 2 decimal places.) Company RJay RJay Sell-Mart Xenon Time to Expiration (months) 1 2 5 6 $ Strike 60 70 60 7.50 $ So 62.92 62.84 69.80 6.78 PV(X) Adjusted Intrinsic Value

. Now assume that the effective annual interest rate is 6.70%, which corresponds to a monthly interest rate of 0.54%. Calculate the present value of each call option's exercise price and the adjusted intrinsic value for each call option. (Do not round your intermediat calculations and round your final answers to 2 decimal places.) Company RJay RJay Sell-Mart Xenon Time to Expiration (months) 1 2 5 6 $ Strike 60 70 60 7.50 $ So 62.92 62.84 69.80 6.78 PV(X) Adjusted Intrinsic Value

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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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

Company
RJay
RJay
Sell-Mart
Xenon
Time to Expiration
(months)
Company
RJay
RJay
Sell-Mart
Xenon
1 $
2
5
6
Time to Expiration
(months)
1
2
5
6
Strike
$
60
70
60
7.50
Strike
$
b. Now assume that the effective annual interest rate is 6.70%, which corresponds to a monthly interest rate of 0.54%. Calculate the
present value of each call option's exercise price and the adjusted intrinsic value for each call option. (Do not round your intermediate
calculations and round your final answers to 2 decimal places.)
So
60 $
70
60
7.50
62.92
62.84
69.80
6.78
So
Intrinsic Value
$
62.92
62.84
69.80
6.78
2.92
0.00
9.80
0.00
PV(X)
Adjusted Intrinsic Value

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