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.
-Suppose the stock is about to go ex-dividend in one day.The dividend will be $4.00.Which of the following calls will you consider for exercise?
Definitions:
Replacement Cost
The cost to replace an asset at its current market price, often used in insurance and accounting.
Inventory
The total amount of goods or materials a company has in stock for sale or production.
LIFO Method
Last In, First Out method; an inventory valuation method where the last items added to inventory are assumed to be sold first.
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