The Buckingham Casino Offers to Give Every Gambler One Share

question 17

Multiple Choice

The Buckingham Casino offers to give every gambler one share of Buckingham Casino Corp.stock if the price drops below $40.00,as an incentive to spur business.If S = $45.25,σ = 0.15,r = 0.05 and div = 0,how much profit or loss is Buckingham incurring if they charge $0.25 to participate in this wager?

• A) $0.31 loss
• B) $0.31 profit
• C) $0.19 loss
• D) $0.19 profit

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Definitions:

Quoted Bid Price

The highest price a buyer is willing to pay for a security or commodity at a given moment.

Treasury Note

A Treasury note is a marketable U.S. government debt security with a fixed interest rate and maturity between one and ten years.

Bid Price

The highest price that a buyer is willing to pay for a security or commodity.

Value-Weighted Index

An index in which each component is included in proportion to its market value, making larger companies account for a bigger portion of the index.