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course hero 13 - Option Pricing using Black-Scholes...

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Option Pricing using Black-Scholes, Warrants, Leasing, Understanding Option Quotes 2) Warrant Value: A warrant gives its owner the right to purchase three shares of common stock at an exercise price of $32 per share. The current market price of the stock is $39. What is the minimum value of the warrant? Witheach warrant 3 shares can be purchased for 3 x $32= $96.00 and sold for 3 x $39 in the market= $117.00 Therefore, minimum value = $117-$96= $21.00 This is the minimum value (intrinsic value) as the warrant also has time value before expiration Answer: $21.00 3)Using the following information to work problems 1-3. You work for a nuclear research lab. That is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive high-tech equipment). The scanner costs $3,000,000, and it would be depreciated straight -line to zero over four years. Because of radiation contamination, it will actually be completely valueless in four years. You can lease it for $895,000 per year for four years.
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course hero 13 - Option Pricing using Black-Scholes...

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