According to the Black-Scholes Model, a call option has a value of 4,500. The underlying asset currently has a total market value of 140,000 and the total exercise price of the option is 138,000. If the market price of call option 4,200, which of the following statement is false? a.) if the option is exercisable as of date, the holder may exercise the call option because the option is in-the-money by 2,000 b.) if the option is exercised, the effect cost of the purchased underlying asset would be 144,500 c.) if a potential buyer prioritizes certainty in cash outflows, the buyers should acquire the call option even if the market value of the underlying asset decreases. d.) a potential buyer should acquire the call option because the total value of the option based on Black-Scholes-Model is greater than its market value.

According to the Black-Scholes Model, a call option has a value of 4,500. The underlying asset currently has a total market value of 140,000 and the total exercise price of the option is 138,000. If the market price of call option 4,200, which of the following statement is false? a.) if the option is exercisable as of date, the holder may exercise the call option because the option is in-the-money by 2,000 b.) if the option is exercised, the effect cost of the purchased underlying asset would be 144,500 c.) if a potential buyer prioritizes certainty in cash outflows, the buyers should acquire the call option even if the market value of the underlying asset decreases. d.) a potential buyer should acquire the call option because the total value of the option based on Black-Scholes-Model is greater than its market value.

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 1P

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