The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 7 through 20.
The stock price was 113.25. The risk-free rates were 7.30 percent (November) , 7.50 percent (December) and 7.62 percent (January) . The times to expiration were 0.0384 (November) , 0.1342 (December) , and 0.211 (January) . Assume no dividends unless indicated.
-What is the time value of the November 115 put?
Definitions:
Discount Rate
It refers to the discount rate applied in discounted cash flow analysis to calculate the current value of future cash flows.
Investment in Equipment
Capital expenditure on physical assets like machinery and equipment intended to be used in the production of goods or services.
Straight-Line Depreciation
A method of allocating the cost of a tangible asset over its useful life in consistent annual amounts.
Remodelling
The process of updating or altering the structure, layout, or appearance of an existing building or space.
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