Willco,Inc

question 5

Multiple Choice

Willco,Inc.issues compensation options with the following terms.Strike = $45,price = $42.00,σ = 0.48,r = 0.05,div = 0.02.What is the value of the option if it will be repriced at $30? Assume 10 years to expiration.

• A) $22.78
• B) $24.65
• C) $26.22
• D) $30.46

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Definitions:

Digested

The process of breaking down food in the body into substances that can be absorbed and used for energy, growth, and cell repair.

Lipase

An enzyme that catalyzes the hydrolysis of fats (lipids).

Muscular Tube

Refers to any tube-like structure in the body that consists of smooth or skeletal muscle, such as the esophagus or intestines.

Esophagus

Tubular organ that connects the pharynx to the stomach.