a. Calculate the intrinsic value for each of the following call options. (Round your answers to 2 decimal places.) Company Time to Expiration Strike SO Intrinsic Value (months) RJay 1 60 62.92 RJay 2 70 62.84 Sell-Mart Xenon 5 60 63.80 6 7.50 6.78 b. Now assume that the effective annual interest rate is 6.82%, which corresponds to a monthly interest rate of 0.55%. Calculate the present value of each call option's exercise price and the adjusted intrinsic value for each call option. (Round your answers to 2 decimal places.) Time to Company Expiration Strike SO PV(X) Adjusted Intrinsic Value (months) RJay 1 60 62.92 RJay 2 70 62.84 Sell-Mart 5 60 63.80 Xenon 6 7.50 6.78

Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
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a. Calculate the intrinsic value for each of the following call options. (Round your answers to 2 decimal places.)
Company
Time to
Expiration
Strike
SO
Intrinsic Value
(months)
RJay
1
60
62.92
RJay
2
70
62.84
Sell-Mart
Xenon
5
60
63.80
6
7.50
6.78
b. Now assume that the effective annual interest rate is 6.82%, which corresponds to a monthly interest rate of 0.55%. Calculate the
present value of each call option's exercise price and the adjusted intrinsic value for each call option. (Round your answers to 2
decimal places.)
Time to
Company
Expiration
Strike
SO
PV(X)
Adjusted
Intrinsic Value
(months)
RJay
1
60
62.92
RJay
2
70
62.84
Sell-Mart
5
60
63.80
Xenon
6
7.50
6.78
Transcribed Image Text:a. Calculate the intrinsic value for each of the following call options. (Round your answers to 2 decimal places.) Company Time to Expiration Strike SO Intrinsic Value (months) RJay 1 60 62.92 RJay 2 70 62.84 Sell-Mart Xenon 5 60 63.80 6 7.50 6.78 b. Now assume that the effective annual interest rate is 6.82%, which corresponds to a monthly interest rate of 0.55%. Calculate the present value of each call option's exercise price and the adjusted intrinsic value for each call option. (Round your answers to 2 decimal places.) Time to Company Expiration Strike SO PV(X) Adjusted Intrinsic Value (months) RJay 1 60 62.92 RJay 2 70 62.84 Sell-Mart 5 60 63.80 Xenon 6 7.50 6.78
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