Why must real options have positive​ value? ​(Select all the choices that​ apply.)     A. Having the real option but not the obligation to act is valuable.   B. Real options must have positive value because they can always be sold to recover the initial investment.   C. Real options must have positive value because they are only exercised when doing so would increase the value of the investment.   D.

Q: Please show all equations and work as needed. If possible, please type the work so that it may be…

A: A real option is an option available to the firm’s managers with respect to investment opportunities…

Q: Explain how the possible profit and loss possibilities arise for an individual who invests in a:…

A: Call options are financial derivative instrument which gives the buyer of the contract the right but…

Q: Let C be the price of a call option to purchase a security whose present price is S.  Explain why C…

A: Options are derivative contracts and the amount that we pay to buy an option is called premium.

Q: Rational investors ________ fluctuations in the value of their investments.A) are averse toB)…

A: Investment management refers to the handling of financial assets and other investments, not only…

Q: What is called the called the return on a stock beyond what would be predicted from market movements…

A: Returns can be of various types

Q: If the market price for an option is lower than what the value is from using the binomial model what…

A: Options are contracts that provide the buyer the right, but not the responsibility, to buy or sell a…

Q: Which of the following contributes positively to the value of a real option to delay investment?…

A: Real option:A real option is a selection made open to a firm's managers on prospects for business…

Q: Which of the following statements is CORRECT?   Group of answer choices   Call options generally…

A: Call option is the financial contract which gives right and not obligation to buy the goods at…

Q: My question is for a synthetic call option why do we need to borrow the present value of the strike…

A: Synthetic calls and synthetic puts are the two types of synthetic options available. Both forms of…

Q: We understand standard deviation of returns as a measure of risk and rational investors would like…

A: Standard deviation is also called as total risk. It contains diversifiable risk and…

Q: TRUE OR FALSE - brief explanation  As a call option is an option to buy and a put option an option…

A:

Q: which one is true? for any type of option strategy, the payoffs will never be negative  for any type…

A: Option C is true.

Q: Which of the following best describes the intrinsic value of an option?     The…

A: Intrinsic Value of an Option: Intrinsic value can be described as a measure of the worth of an…

Q: Explain how the possible profit and loss possibilities arise for an individual who invests in a: a.…

A: (a)(i)The stock option may be of two types: a call option and a put option. Call option gives a…

Q: Michael Weber, CFA, is analyzing several aspects of option valuation, including the determinants of…

A: The measurement which is used to determine the variability of the option's price due to fluctuations…

Q: Which is the type of Brokerage firm that allow investors to perform their own investment research…

A: A full-service broker refers to a licensed entity that provides a complete stack of services related…

Q: 2) Which of the following statements is FALSE? A) The option buyer, also called the option holder,…

A: Option is a derivative contract which allows the buyer of the option a right to buy or sell the…

Q: Which of the following is not a discounted technique Select one: a. Net present value b. Discounted…

A: Discounted technique is a technique to determine the present value of future cash flows.

Q: iscuss which of the following statements is true. D I. An American call option is more expensive…

A: Step 1   European options are extensively traded; they trade at a smaller volume than American…

Q: which one is correct please confirm? Q2" Which of the following strategies will be profitable if…

A: option are good strategy for hedge and there are two types of option one is call and other is put.…

Q: With reference to the Black Scholes model, explain the concept of risk neutral valuation. Outline…

A: Risk-neutral valuation : Valuation that is risk-free. When valuing derivatives like stock options,…

Q: To hedge, a user of an energy resource wants price protection from rising prices. The user decides…

A: Options are the derivative instrument that can be used by the investors to hedge their risk of loss.…

Q: Which of the following will NOT increase the value of a real (call) option?

A: The following does not increase the value of the real (call) option: An increase in the probability…

Q: Companies often have to increase their initial investment costs to obtain real options. Whymight…

A: The company spends huge capital on the projects that will add value to the organization but if the…

Q: Discuss which of the following statements is true.   I. An American call option is cheaper than a…

A: American call can be exercised before expiration also but European call can not be exercised before…

Q: Options can be risky because it's a leveraged strategy.   True or False

A: Option are very good way to hedge the market and earn unlimited profit on that.

Q: pose stocks X and Y have equal current prices but different volatilities of returns, ax < øy; what…

A: Value of call option depends on the underlying prices and the volatilities of stock return because…

Q: the following strategy would you adopt if you expect the fall in prices of a stock? A. Buy a call B.…

A: Hedging is the way to reduce the risk in the future that can be done by the buying stock options and…

Q: Consider the following statement: “In contexts of increased uncertainty, the usefulness of real…

A: A real option allows a company's executives the option, but not the responsibility, to pursue…

Q: “Even in an efficient market, it is still valid to seek out a ‘favourable’ rate of return from an…

A: Efficient Market Theory: Equities' pricing should represent all available information, according to…

Q: As a call option is an option to buy and a put option an option to sell, the opposite position to…

A: Options give the buyer the right to purchase the underlying asset but not the obligation to exercise…

Q: ich of the following inputs is not required to price option using the Black‐Scholes model?  a) the…

A: Introduction: The Black-Scholes model is a differential equation used in financial theory. The…

Q: Which of the following about options contracts is not true? One only side has an obligation; the…

A: Option is a financial contract where it provides its holder the right to exercise option, if he/she…

Q: Why do options sell at prices higher than their exercise values?

A: Options are contracts that give an 'option' or a choice to the holder to exercise the option or to…