What unique feature about perpetual options makes it possible to derive a valuation formula?
What will be an ideal response?
The time to expiration is constant: infinity. Given that time to expiration is constant, the price for early exercise is also a constant.
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Consider a product with three components in series, with reliabilities of 0.90, 0.80, and 0.99 for components A, B, and C, respectively. Furthermore, component B uses a backup that also has a reliability of 0.80
What is the reliability of the system? A) 0.50000 B) 0.71280 C) 0.80000 D) 0.85536 E) 3.49000
Crosby Inc. has an 11% required rate of return. It does not expect to initiate dividends for 20 years, at which time it will pay $4.00 per share in dividends. At that time, Crosby expects its dividends to grow at 6% forever
What is an estimate of Crosby's price in 20 years (P20) if its dividend at the end of year 20 is $4.00? A) $34.80 B) $55.00 C) $57.50 D) $84.80