Albert Has Accepted a Wager to Receive $5

question 14

Multiple Choice

Albert has accepted a wager to receive $5.00 if the price of Will Co.is above $35.00 per share.This right only exists if Will Co.drops below $33.00 sometime over the coming 100 days.Currently,Will Co.stock price is $38.24,r = 0.05,σ = 0.33,and div = 0.What is the value of Albert's position?

• A) $0.35
• B) $0.25
• C) $0.15
• D) $0.05

---

Definitions:

Sharpe Measure

A method to calculate risk-adjusted return, comparing the return of an investment to its risk.

Standard Deviation

A statistical measure that indicates the extent of deviation or dispersion of a set of values from their mean.

Beta

A measure of a stock's volatility in relation to the overall market.

Sharpe Measure

A formula used to calculate the adjusted return of an investment by considering its risk, allowing for comparison against risk-free assets.