Principles of Corporate Finance_ 12th Edition

532 Part Six Options bre44380_ch20_525-546.indd 532 09/30/15 12:07 PM these two positions. Notice that, if the price of Google s ...

Chapter 20 Understanding Options 533 bre44380_ch20_525-546.indd 533 09/30/15 12:07 PM is identical to the payoff from Buy put, b ...

534 Part Six Options bre44380_ch20_525-546.indd 534 09/30/15 12:07 PM investment will pay off $530. The third diagram shows the ...

Chapter 20 Understanding Options 535 bre44380_ch20_525-546.indd 535 09/30/15 12:07 PM We could have made the incentive scheme de ...

536 Part Six Options bre44380_ch20_525-546.indd 536 09/30/15 12:07 PM So far we have said nothing about how the market value of ...

Chapter 20 Understanding Options 537 bre44380_ch20_525-546.indd 537 09/30/15 12:07 PM If the stock and the option have the same ...

538 Part Six Options bre44380_ch20_525-546.indd 538 09/30/15 12:07 PM If there is a positive probability of a positive payoff, a ...

Chapter 20 Understanding Options 539 bre44380_ch20_525-546.indd 539 09/30/15 12:07 PM ◗ FIGURE 20.12 How the value of the Google ...

540 Part Six Options bre44380_ch20_525-546.indd 540 09/30/15 12:07 PM Thus the value of an option increases with both the volati ...

If you have managed to reach this point, you are probably in need of a rest and a stiff gin and tonic. So we will summarize what ...

542 Part Six Options bre44380_ch20_525-546.indd 542 09/30/15 12:07 PM Select problems are available in McGraw-Hill’s Connect. Pl ...

Chapter 20 Understanding Options 543 bre44380_ch20_525-546.indd 543 09/30/15 12:07 PM Option payoffs What is a call option wort ...

544 Part Six Options bre44380_ch20_525-546.indd 544 09/30/15 12:07 PM a. Draw a position diagram showing the payoffs when the op ...

Chapter 20 Understanding Options 545 bre44380_ch20_525-546.indd 545 09/30/15 12:07 PM Stock Time to Exercise (months) Exercise P ...

546 Part Six Options bre44380_ch20_525-546.indd 546 09/30/15 12:07 PM to sell its share in the land back to Bond for $110 millio ...

● ● ● 547 bre44380_ch21_547-572.indd 547 10/05/15 12:53 PM Part 6 Options I n the last chapter we introduced you to call and put ...

548 Part Six Options bre44380_ch21_547-572.indd 548 10/05/15 12:53 PM Why Discounted Cash Flow Won’t Work for Options For many y ...

Chapter 21 Valuing Options 549 bre44380_ch21_547-572.indd 549 10/05/15 12:53 PM Notice that the payoffs from the levered investm ...

550 Part Six Options bre44380_ch21_547-572.indd 550 10/05/15 12:53 PM This suggests an alternative way to value the option. We c ...

Chapter 21 Valuing Options 551 bre44380_ch21_547-572.indd 551 10/05/15 12:53 PM hypothetical risk-neutral world and discount it ...