All else being equal, explain why American options are at least as valuable as European options
What will be an ideal response?
Answer:
The rare instances in which early exercise might occur, due to the desire to get dividends or interest on the strike, adds value since European options can never take advantage of such opportunities.
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The practice in law-governed societies in which laws are known and understood, and there is an ability to appeal to higher authorities to ensure that the laws are applied correctly is called:
A) liability. B) due process. C) the courts of appeal. D) accountability. E) responsibility.
What is the market-based transfer price per compressor from the Compressor Division to the Fabrication Division?
Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $40.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials $15.00 Direct labor $7.25 Variable overhead $3.00 Division fixed costs $7.50 Fabrication's costs per completed air conditioner are: Direct materials $150.00 Direct labor $62.50 Variable overhead $20.00 Division fixed costs $7.50 A) $17.00 B) $27.25 C) $34.75 D) $40.00