I need Just Part A Solution 4. Options and FuturesA. Your employer is offering you stock options on the firm as part ofyour pay package. You know the following about this offer:Current Stock PriceExercise PriceMaturity (yrs)Risk-free RateStock Volatility$23$2822.25%23%What is the value of the option? Suppose the Fed reduces Treasury rates to2.0%, what is the new price of the option? After the rate reduction, yourcompany's share price rises to $25, what is the new price of the option?B. Your cousins grow corn in Wisconsin and plan to harvest 7,000,000 bushels atthe end of the season. They are unsure whether to sell the futurescontracts and lock the price in at $5.05/bushel or take a gamble and sell itall at the spot price at season's end. They think they can get $4.50/bushelbased on historical prices and their own analysis.Assuming no transaction costs and each contract covers 5,000 bushels,what will the cousins' profit/loss be if they sell the contracts and the spotprice is $4.85 at maturity? Ukraine had a bumper harvest and spot pricesfall to $4.70/bushel, what will the cousins' profit/loss be now?

The Black and Scholes model is used to calculate the value of an option on the basis of six…

A. Your employer is offering you stock options on the firm as part of your pay package. You know the following about this offer: $23 $28 | Current Stock Price Exercise Price | Maturity (yrs) Risk-free Rate | Stock Volatility 2.25% 23% What is the value of the option? Suppose the Fed reduces Treasury rates to 2.0%, what is the new price of the option? After the rate reduction, your company's share price rises to $25, what is the new price of the option?

A. Your employer is offering you stock options on the firm as part of your pay package. You know the following about this offer: $23 $28 | Current Stock Price Exercise Price | Maturity (yrs) Risk-free Rate | Stock Volatility 2.25% 23% What is the value of the option? Suppose the Fed reduces Treasury rates to 2.0%, what is the new price of the option? After the rate reduction, your company's share price rises to $25, what is the new price of the option?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4MC

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