Final exam of Fin $6020$

Name:Fernando Inzunza

Your business went well and profits increased exponentially. Thus you decide to raise money and expand your business by selling stocks $($common equity$)$ to the market. Now you need to meet an intermediate financial institution and negotiate your stock price to sell them to the institution. Here is stock related information:

Expected return is $12\%.$

Your stock is expected to pay $$2$ dividend $($D$1).$

The dividend payment will grow by $6\%$ annually and permanently.

How much is your estimated stock price? $(10$ points$)$

We have option price information of APPLE:

Contract Name

Last Price

Bid

Ask

AAPL$250218$C$00170000170\mathrm{.}00$

$12\mathrm{.}26$

$13\mathrm{.}55$

$(1)$ If you buy this option contract, how much need to pay? Here its exercise price is $$170.(5$ points$)$

$(2)$ If a market price of APPLE is $$180,$ how much is an exercise value? $(5$ points$)$