Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 23, Problem 2MC
Summary Introduction

To determine: Whether the options should be kept or exercised and the important factors in making such decisions.

Employee Stock Option:

Employee stock option is given by the company to attract and retain the employees in the organization. Company contract with the employee gives the right to purchase some number of stocks of share from the company within a period.

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Normal probability distribution Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 17.2%; and that the coefficient of variation, CV, is 0.86, answer the following questions: a. Find the standard deviation of returns, or. b. Calculate the range of expected return outcomes associated with the following probabilities of occurrence: (1) 68%, (2) 95%, (3) 99%. a. The standard deviation of returns, or, is %. (Round to three decimal places.) b. (1) The lowest possible expected return associated with the 68% probability of occurrence is %. (Round to two decimal places.) The highest possible expected return associated with the 68% probability of occurrence is decimal places.) (2) The lowest possible expected return associated with the 95% probability of occurrence is decimal places.) %. (Round to two %. (Round to two The highest possible expected return associated with the 95% probability of occurrence is decimal…
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