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BBMF2073 FOREX AND DERIVATIVESTutorial 14: Options in Corporate Finance and Real OptionsQuestion 1:A sole proprietor has RM500,000 of equity in his firm. Suppose he borrows RM4 million at10% interest per year, show at end of year 1,i) the payoff to the proprietorii) the payoff to the debt holderQuestion 2:Learning that you have just completed a course in Risk Management, a friend comes to youfor advice. He is faced with two investment choices.Option 1: Place a RM10,000 investment with an index fund for one year. (An index fund is amutual fund that invests in a portfolio that tracks the index.Option 2: Place the RM10,000 with an index linked bank deposit that a local bank is offering.Under this scheme, a depositor gets back his entire capital and zero interest if the FBMKLCI