You are considering a position as the director of finance in a company listed on the Lusaka Securities Exchange Plc. Since the firm is still new, the salary is not that great but your package will include call options on 5,000 shares of the company. The shares are currently selling for K5 per share. The call options granted to you if you accept the job have an exercise price of K5 and expire in three years. The call options cannot be exercised before maturity. The stock volatility is 28% and the three-year risk free rate is 3.6%.A call with a strike price of K30 costs K3. Required: Calculate the value of the call option.
You are considering a position as the director of finance in a company listed on the Lusaka Securities Exchange Plc. Since the firm is still new, the salary is not that great but your package will include call options on 5,000 shares of the company. The shares are currently selling for K5 per share. The call options granted to you if you accept the job have an exercise price of K5 and expire in three years. The call options cannot be exercised before maturity. The stock volatility is 28% and the three-year risk free rate is 3.6%.A call with a strike price of K30 costs K3. Required: Calculate the value of the call option.
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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You are considering a position as the director of finance in a company listed on the
Lusaka Securities Exchange Plc. Since the firm is still new, the salary is not that
great but your package will include call options on 5,000 shares of the company.
The shares are currently selling for K5 per share. The call options granted to you
if you accept the job have an exercise price of K5 and expire in three years. The
call options cannot be exercised before maturity. The stock volatility is 28% and
the three-year risk free rate is 3.6%.A call with a strike price of K30 costs K3.
Required: Calculate the value of the call option.
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