Present value of payoff, If you exercise your put in one year, what will be the payoff?, Finance Basics

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Present value of payoff

Assume that you hold an American put option on NetPlus Communications. The option has a strike price of $50 and expires in one year. Netplus has utterly failed and its stock price has dropped to zero. It has no hope of recovering. The risk-free rate of return is 10%.

a. If you exercise your put in one year, what will be the payoff? What is the present value of this payoff?

b. If you exercise your put now, what will be your payoff? What is the present value of this payoff?

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Finance Basics: Present value of payoff

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Finance Basics: Present value of payoff

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Recent Questions Asked Finance Basics

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Request for Solution File

Ask an Expert for Answer!!

Finance Basics: Present value of payoff

Reference No:- TGS046572

Recent Questions Asked Finance Basics

Q : Deduction on schedule for special clothing and uniforms

Q : Identify an incentive conflict in the firm

Q : Probability of the high payoff

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