SOC 202 Study Guide - Market Price, Liquid Oxygen, Forego
12 Mar 2014
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Document Summary
Lo1 the basics of call and put options and how to calculate their payoffs and profits. Lo2 the factors that affect option values and how to price call and put options using no arbitrage conditions. Lo3 how to value a firm"s equity as an option on the firm"s assets and use of option valuation to evaluate capital budgeting projects. Lo4 the basics of employee stock options and their benefits and disadvantages. Lo5 the basics of convertible bonds and warrants and how to value them. Answers to concepts review and critical thinking questions. 2. (lo1) a call option confers the right, without the obligation, to buy an asset at a given price on or before a given date. A put option confers the right, without the obligation, to sell an asset at a given price on or before a given date. You would buy a call option if you expect the price of the asset to increase.
