financial derivatives, Could you please calculate the correct answers for Q3 option prices (a) and (b) based on the first part of Q3? Thanks a lot for your help.
Homework due Jan 27, 2021 23:00 CST Completed Question 3. Intro for practice. 3.0/3.0 points (graded) The market value of Company XYZ's asset is currently $25,000,000. The capital structure of XYZ has two elements: debt with face value $18,000,000, which matures one year from now, and common equity, with 100,000 shares outstanding. Currently, the total market value of XYZ's debt is $15,000,000, and the market value of its equity is $10,000,000. (a) Complete the table below entering XYZ's equity and debt values (in millions) conditional on the value of its assets a year from now. Assets Total Equity Total Debt $10 min 0 $ million 10 $ million $25 min $ $ million 7 18 $ million $40 min 22 $ $ million 18 $ million Please round your answers to at least two digits. e.g., if the answer is 19/17, submit 1.12. 1.1 will be marked as incorrect! 1.1176 will be accepted. Make sure you provide the type of answer required. Pay special attention to units specified in the trailing text after the blanks. (e.g., % When submitting your answer, make sure you do not leave empty blanks. Do not use % and $ signs. Submit Save You have used 1 of 5 attempts Show answer Question 3. Option Prices 0.0/9.0 points (graded) The market value of Company XYZ's asset is currently $25,000,000. The capital structure of XYZ has two elements: debt with face value $18,000,000, which matures one year from now, and common equity, with 100,000 shares outstanding. Currently, the total market value of XYZ's debt is $15,000,000, and the market value of its equity is $10,000,000. Consider a European call and a European put options on the stock of XYZ maturing a year from now. Assume that the stock of XYZ pays no dividends during the life of the options, and the strike price of the options is $80. Assume that a year from now the total value of assets of XYZ can take only one of two values: $10,000,000 or $40,000,000. (a) What is the market value of the described call option today? 14000000.00 Use 2 decimal places of precision (b) What is the market value of the described put option today? 8000000.00 Use 2 decimal places of precision. Please round your answers to at least two digits. Homework due Jan 27, 2021 23:00 CST Completed Question 3. Intro for practice. 3.0/3.0 points (graded) The market value of Company XYZ's asset is currently $25,000,000. The capital structure of XYZ has two elements: debt with face value $18,000,000, which matures one year from now, and common equity, with 100,000 shares outstanding. Currently, the total market value of XYZ's debt is $15,000,000, and the market value of its equity is $10,000,000. (a) Complete the table below entering XYZ's equity and debt values (in millions) conditional on the value of its assets a year from now. Assets Total Equity Total Debt $10 min 0 $ million 10 $ million $25 min $ $ million 7 18 $ million $40 min 22 $ $ million 18 $ million Please round your answers to at least two digits. e.g., if the answer is 19/17, submit 1.12. 1.1 will be marked as incorrect! 1.1176 will be accepted. Make sure you provide the type of answer required. Pay special attention to units specified in the trailing text after the blanks. (e.g., % When submitting your answer, make sure you do not leave empty blanks. Do not use % and $ signs. Submit Save You have used 1 of 5 attempts Show answer Question 3. Option Prices 0.0/9.0 points (graded) The market value of Company XYZ's asset is currently $25,000,000. The capital structure of XYZ has two elements: debt with face value $18,000,000, which matures one year from now, and common equity, with 100,000 shares outstanding. Currently, the total market value of XYZ's debt is $15,000,000, and the market value of its equity is $10,000,000. Consider a European call and a European put options on the stock of XYZ maturing a year from now. Assume that the stock of XYZ pays no dividends during the life of the options, and the strike price of the options is $80. Assume that a year from now the total value of assets of XYZ can take only one of two values: $10,000,000 or $40,000,000. (a) What is the market value of the described call option today? 14000000.00 Use 2 decimal places of precision (b) What is the market value of the described put option today? 8000000.00 Use 2 decimal places of precision. Please round your answers to at least two digits
