1. What is the optimal capital structure for an organization, or does it vary from industry to industry?
2. Using the Black-Scholes option pricing model, calculate the value of a European call option on S&P500 under the following parameters. Current value of S&P500 is $940, interest rate is 0.17% per year, annualized volatility of S&P500 is 24%, option strike is $950, and option expiration is in 3 months. (These are data from the financial crisis period.)
S = 940
X = 950
r = .0017
sigma = 0.24
T = 0.25