The value of a call option out-of-the money is ________

Select one:

a. equal to the exercise price.

b. equal to zero before expiry.

c. none of the THESE are correct.

d. lower than zero before expiry.

e. higher than zero at expiry.

Stock A has an expected return of 10% and standard deviation of 30%. On the other hand stock B has an expected return of 15% and standard deviation of 40%. If the correlation between both stocks is zero, then an equally weighted portfolio of both stocks will have a standard deviation of 35%.

Select one:

True

False

A firm is planning to invest in a plant with a cost of $400 million financed with an equity issue underwritten by an investment bank. If the flotation cost (fee) is 6% of the total cost, then the total amount to be raised is $424 million.

Select one:

True

False