1. The price of the IBM call option for the exercise price of $96 is $2.00. What is the payoff per share for a long position in the option if the stock price at expiration date is $112.00?
$14.00
$18.00
$8.00
$16.00
$21.00
2. Equivalent annuities and growing perpetuities-Assume that the cost of the third-party storage option will increase 2.5% a year forever. What would the equivalent annuity for this option be? Explain your answer.
a). $2.05 million b). $2.78 million c). $2 million d). None of the above