Allison's Market Is Currently Valued at $68,400

question 78

Multiple Choice

Allison's Market is currently valued at $68,400.The firm has a pure discount bond in the amount of $50,000 that is due in 1 year.The risk-free rate is 3.2 percent.What is the minimum value the firm must maintain if the shareholders are to exercise their call option on the firm in 1 year?

• A)$50,000.00
• B)$48,449.61
• C)$51,600.00
• D)$66,279.07
• E)$70,588.80

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Definitions:

Qualitative Forecasting Methods

Forecasting techniques based on expert judgments and not on numerical data, often used for market trends.

Time Series Forecasting Methods

Statistical techniques used to predict future values based on previously observed values over time, often applied in finance, weather forecasting, and inventory management.

Simplicity

The quality of being easily understood or executed without complexity.

Starting Point

The initial position, condition, or phase from which a process, project, or calculation begins.