a. In Section 21-3, we calculated the risk (beta) of a six-month call option on Amazon stock
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a. In Section 21-3, we calculated the risk (beta) of a six-month call option on Amazon stock with an exercise price of $900. Now repeat the exercise for a similar option with an exercise price of $750. Does the risk rise or fall as the exercise price is reduced?
b. Now calculate the risk of a one-year call on Amazon stock with an exercise price of $750. Does the risk rise or fall as the maturity of the option lengthens?
MaturityMaturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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a Option beta at an exercise price of 750 P 900 EX 750 s 25784 t 5 r f 01 annual Stock beta 15 Riskf...View the full answer
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Related Book For 
Principles of Corporate Finance
ISBN: 978-1260013900
13th edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen
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