5. Again consider the widget investment problem in Section 1.Verify that with S = ($50), K =...
Question:
5. Again consider the widget investment problem in Section 1.Verify that with S = \($50\), K = \($30\), r = 0.04879, σ = 0, and δ = 0.009569, the perpetual call price is \($30.597\) and exercise optimally occurs when the present value of cash flows is \($152.957\). What happens to the value of the project and the investment trigger when you change S?
Why? What happens to the value of the project and the investment trigger when you increase volatility? Why?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Derivatives Markets Pearson New International Edition
ISBN: 978-1292021256
3rd Edition
Authors: Robert L. Mcdonald
Question Posted: