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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 2P

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