Use the Following Information to Answer the Question(s)below

question 69

Multiple Choice

Use the following information to answer the question(s) below.
Sarah Palin reportedly was paid a $11 million advance to write her book Going Rogue.The book took one year to write.In the time she spent writing,Palin could have been paid to give speeches and appear on TV news as a political commentator.Given her popularity,assume that she could have earned $8 million over the year (paid at the end of the year) she spent writing the book.
-Assuming that Palin's cost of capital is 10%,then the NPV of her book deal is closest to:

• A)$2.00 million
• B)$2.20 million
• C)$3.00 million
• D)$3.75 million

---

Definitions:

Strike Price

The specified price at which the holder of an option can buy or sell the underlying security.

Market Price

The current price at which an asset or service can be bought or sold in a marketplace, determined by supply and demand dynamics.

Strike Price

In options trading, the predetermined price at which the holder of the option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Put Option

This is a financial deal which provides the participant the freedom, but not the compulsion, to part with a given amount of a principal asset at an established cost during a set span.