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You have been provided with the following information:
S = $25
Exercise price = $20
Risk-free rate = 1%
Volatility is 20%
The option expires in one year.
Based on this information, what is the value of the corresponding call option?
(NOTE: if using the appendix A-1 to solve for the N(d1)and N(d2)values you should truncate d1 and d2 to two decimal places and round down.
Fair Market Value
An estimate of the market price of a property or asset if sold under competitive and open market conditions.
Marketable Securities
Financial instruments that can be easily converted into cash at market value, often used for short-term investments.
Current Liabilities
Obligations or debts a company is expected to pay off within a year.
Operating Cycle
The time period it takes for a company to purchase inventory, sell products, and convert sales into cash.
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