The fair value of stock options can be considered to comprise two main components. What are they?

Q: Can an investor eliminate market risk from a common stock portfolio?

A: There are two types of Risk 1. Systematic  Risk:- These are risk pertains to Industry as a whole not…

Q: Why does the dilutive effect of stock options called the treasury stock method?

A: Treasury Stock Method: In this method, a company that receives exercised amount on the outstanding…

Q: What’s the difference between a stock’s current market price and its intrinsic value?

A: Stock Current market price is the price at which the stock traded in the market.   Intrinsic value…

Q: What are Stock Options?

A: Stock options are the benefits given by a company management to its employees. These are options…

Q: Explain in detail with an example how the change of the variables (like Stock Price, Exercise Price,…

A: Black Scholes Merton is an option valuation model. In Black Scholes Merton formula, there are five…

Q: Explain with examples of how an option holder gains or losses from an increase in the volatility of…

A: Option buyer buys a right to exercise buy or sell, at the time of their benefit, at a pre-defined…

Q: If the risk of a stock increases, what is likely to happen to the price of call options on the…

A: Options give the right to the buyer of the option to exercise the option but not the obligation.

Q: The most popular type of derivative securities is options. Discuss what is an option? Define calls…

A: Option is a type of derivative instrument which gives a right, not the obligation to the holder to…

Q: Explain why common stock is itself like a call option. What plays the role of the exercise price and…

A: There are two types of options in the market: call options and put options.  Call options allow the…

Q: How does the put-call parity formula for a futures option differ from put-call parity for an option…

A: Put call parity is defined as the holding of the short European put as well as long European call of…

Q: How to use call options and put options to create a synthetic short position in stock?

A: An options are actually touted as one of common method for the profit from the swings of the market.…

Q: (Based on Appendix A) The fair value of stock options can be considered to comprise two main…

A:

Q: Explain the significance of par value. Does par value indicatethe reasonable market price for a…

A: Significance Of Par value: *Par value is the face value of the shares, the principal amount investor…

Q: Define stock option

A: Stock Option, in simple terms, is a Financial instrument that gives the holder of the instrument the…

Q: Is it possible to view a firm's equity as an option? What could be the implications?

A: Let's recall the following two points:Basic accounting equation: Assets, A = Equity, E +…

Q: discuss  the advanatages and disadvantages of options in the financial markets?

A: Advantages: The market is in fluctuation. In these circumstances the seller and buyer should use the…

Q: Write a brief definition for each of the following terms: Fair value. Stock options.

A: 1. Fair value:- Fair value is also called like a market value.  Fair value is a term with several…

Q: what are the advantages and disadvantages of covered call and protective put which are options…

A: Due to uncertain factors, security prices fluctuate regularly which creates risk for the investors.…

Q: Stock appreciation right would normally be settled through

A: Second option is wrong because stock appreciation right is not settled through issue of share…

Q: The par value of a stock is legally significant.

A: Solution: The par value of a stock "is legally significant".

Q: Why are the probabilities of stock price movements not used in the binomial model for calculating an…

A: The binomial option pricing framework was established in 1979 as a technique for valuing options.…

Q: Define Restricted Stock Awards.

A:

Q: Why do call options with exercise prices greater than the price of the underlying stock sell for…

A: To understand this statement, we consider a practical example Let stock have current price…

Q: How do restricted stock awards differ from restricted stock units (RSUs)?

A: Restricted stock: Restricted stock is the portion of shares held up by the management, to be issued…

Q: Briefly describe the use of stock options in acompensation plan. What are some potential problems…

A: A stock option is basically a contract between a buyer and a seller, wherein the buyer has the right…

Q: What are the best investment options between bonds and stocks?

A: Investing in both bonds and stocks diversifies a portfolio and provides the combined benefits of the…

Q: How is the intrinsic value of the call option impacted as the stock price changes? How is the time…

A: 1) Intrinsic value of a call option for a trader is the current value of the option. It is the…

Q: Current GAAP recommends that the fair value method be used to account for compensatory stock option…

A: The answer for the theory question on the Fair value method to account for the Compensatory stock…

Q: What is meant by the delta of a stock option?

A: It is certain for call options and negative for put options. That is on the grounds that an increase…

Q: in options trading, margin must be posted by______

A: Margin is a amount of cash or securities that is necessary to deposit before executing trade in…

Q: The fair value of a stock can be determined by the factors of market forces Select one: a. True…

A: Fair value of stock is its fundamental value. It is the intrinsic value of the stock and does not…

Q: Describe how a typical stock option plan works. What are someproblems with a typical stock option…

A: The stock option plan is the plan for the employees to buy the company’s shares in which they are…

Q: What date or event does the profession believe should be used in determining the value of a stock…

A: Stock options give the right to purchase a stock from an organization at a fixed price. The market…

Q: What are the basics on purchasing stock options ?

A: Stock options are better way of hedging position in the market.