1. The price of Dimension stock will be either $65 or $87 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 3.6 percent. Suppose the current price of Dimension stock is $70. What is the value of the call option if the exercise price is $60 per share?
$12.08
$14.48
$9.58
$10.39
$13.62
2. Electronic Importers has a pure discount bond with a face value of $30,000 that matures in one year. The risk-free rate of return is 3.6 percent. The assets of the business are expected to be worth either $29,000 or $35,000 in one year. Currently, these assets are worth $28,300. What is the current value of the bond?
$28,146.14
$19,206.67
$20,222.22
$22,547.69
$28,043.56