Question 2 a. Miss Liza, the CFO of Nice Biscuit Berhad (NBB) believes that all corporate securities have implicit or explicit option features and as a result, understanding securities that possess option features requires knowledge of the factors that determine an option's value. Miss Liza is also aware that the most familiar options are stock options. On 13th June 2024, Miss Liza buys call options on 50,000 units of Petronas Dagangan Berhad (PDB) shares with an exercise price of RM40 per unit. The value of the options is RM2 per unit and the termination date is on 30th June 2024. On 30th June 2024n the share price of PDB share is RM42. From the above information you are required to compute Miss Liza's gain or losses. Based on your computation, explain to Miss Liza about this situation.

Entrepreneurial Finance
6th Edition
ISBN:9781337635653
Author:Leach
Publisher:Leach
Chapter8: Securities Law Considerations When Obtaining Venture Financing
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Question 2
a. Miss Liza, the CFO of Nice Biscuit Berhad (NBB) believes that all corporate securities have
implicit or explicit option features and as a result, understanding securities that possess
option features requires knowledge of the factors that determine an option's value. Miss
Liza is also aware that the most familiar options are stock options.
On 13th June 2024, Miss Liza buys call options on 50,000 units of Petronas Dagangan
Berhad (PDB) shares with an exercise price of RM40 per unit. The value of the options is
RM2 per unit and the termination date is on 30th June 2024.
On 30th June 2024n the share price of PDB share is RM42.
From the above information you are required to compute Miss Liza's gain or losses.
Based on your computation, explain to Miss Liza about this situation.
Transcribed Image Text:Question 2 a. Miss Liza, the CFO of Nice Biscuit Berhad (NBB) believes that all corporate securities have implicit or explicit option features and as a result, understanding securities that possess option features requires knowledge of the factors that determine an option's value. Miss Liza is also aware that the most familiar options are stock options. On 13th June 2024, Miss Liza buys call options on 50,000 units of Petronas Dagangan Berhad (PDB) shares with an exercise price of RM40 per unit. The value of the options is RM2 per unit and the termination date is on 30th June 2024. On 30th June 2024n the share price of PDB share is RM42. From the above information you are required to compute Miss Liza's gain or losses. Based on your computation, explain to Miss Liza about this situation.
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