1.Suppose you believe that Basso Inc.'s stock price is going to increase from its current level of $15 sometime during the next 6 months. You can buy a 6-month call option giving you the right to buy 1 share at a price of $31 per share. If Basso's stock price actually rises to $44, what would the exercise value be?

2.NessCorporationis financed only with common equity (i.e. it has zero debt). Its total assets are $400,000. The new CFO wants to employ enough debt to bring the debt/assets ratio to 50%, using the proceeds from the borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio?