The Delta of a Call Option on a Firm's Assets

question 78

Multiple Choice

The delta of a call option on a firm's assets is 0.767.This means that a $75,000 project will increase the value of equity by:

• A)$38,350.
• B)$45,336.
• C)$57,525.
• D)$64,627.
• E)$65,189.

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Definitions:

Investing Activities

Transactions and events related to the acquisition and disposal of long-term assets and investments, reported in the cash flow statement.

Hedging

A maneuver or contract that eliminates risk from a transaction. In international trade, eliminating exchange rate risk by purchasing a forward contract for delivery of foreign exchange at a specified rate at a specified time.

Settlement Date

The day when a trade is finalized, and the buyer must pay for the securities.

Floating Exchange Rate

A currency's value is allowed to fluctuate according to the foreign exchange market without direct government control.