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February 24, 2015 at 3:47 pm
Please give me an example on how to use the distribution table i got lost in Example 5 on the column 0.09 why that column?
John Moffat says
February 24, 2015 at 4:03 pm
I assume you were happy in arriving at the figure of -0.6886 for D1 (the workings are at the end of the lecture notes as well).
We look up 0.69 in the tables (we can only look up for 2 decimal places, so 0.6886 becomes 0.69). So do this you look along the 0.6 row and as you move through the columns it gives the figure for 0.60, 0.61, 0.62 and so on. We want 0.69 and so it is the 0.6 row and the 0.09 column, and the figure from the tables is 0.2549.
Because D1 is negative, we subtract then 0.2549 away from 0.5.
(Had it been positive, as D2 is, then we would add 0.5). This rule is given at the bottom of the tables.
You should be able to follow the rest of the answer at the back of the Lecture Notes.
(How did you manage to sort out the first four examples, but not example 5? :-))
March 14, 2015 at 7:00 pm
i only started practicing exmaple 5 then i got lost. Many thanx for your advice
November 7, 2014 at 2:11 pm
John i have this question. it concerns calculatind d1 if a questions is given n i calculate d1 and a figure say 1.2812 and i then round it to 1.28 and another candidate calculates his and round it to 1.3. these two answers will give different values for N(d1) which will lead to a different value for a call option. will the two of us have all the marks. I am asking because when calculating the figure for natual log of Pa/Pe due to rounding candidates will have different answers
November 7, 2014 at 5:25 pm
Firstly most if not all of the marks are for proving you understand what is happening rather than for the final answer.
Secondly, when rounding you should really round to the number of decimals needed for the tables, so why round to 1.3 when the tables allow you to look up 1.28
May 28, 2014 at 2:03 am
How can I Have Lectures of Business Valuation
May 28, 2014 at 5:45 am
There are no lectures yet on business valuation.
November 23, 2013 at 7:57 am
How can i download this?or this is only for watching?
November 23, 2013 at 7:59 am
I am sorry, but you can only download the course notes – the lectures can only be watched online.
It is the only way that we can keep this website free of charge.
November 23, 2013 at 8:07 am
Can u provide me solution of paper strategic financial management 3.7 of december 2006 of ACCA………?
November 23, 2013 at 8:11 am
I don’t think that I have it any longer – I will check later.
Do remember that the examiner (and the syllabus) has changed twice since then.
November 23, 2013 at 12:38 pm
November 14, 2013 at 6:57 pm
sir in example you taken t as 0.4 in formula of call option and put option i guess thats a mistake it should be 0.25 right?
i mean example 5.
November 14, 2013 at 8:36 pm
I have watched my lecture again, and it seems that I have taken ‘t’ as 0.25 correctly (it is ‘s’ that is 0.4).
You can of course check the answer at the back of the Course Notes. I think it is correct.
December 1, 2013 at 1:51 pm
Dear John, it seems when calculating ‘-rt’ in example 6 (52,48 minute of the lecture and so on) you’ve multiplied 0,1 (r) by 0,4 instead of 0,25 (t)….
December 1, 2013 at 1:58 pm
Ooops – you are correct.
October 16, 2013 at 4:52 am
September 4, 2013 at 1:04 am
These are very well explained lectures and are a great help. Thank you sir and Open Tuition.
June 1, 2013 at 1:39 am
I have a very basic ques.. But its really confusing me. why the value of option is share price – excercise price?
June 1, 2013 at 4:10 pm
If it was a call option exercisable immediately, then the option gives you the right to buy a share at a fixed price.
So, for example, if the current share price is $4.00 and you could buy an option giving you the right to buy the share at an exercise price of $3.70, then you could buy the share for $3.70 and immediately sell it for $0.30.
Nobody is going to give you that right free! You would be prepared to pay $0.30 for the option. Then you could use it and buy a share for $3.70. You have then spent $4.00 in total and you own a share worth $4.00
(But of course, that is only if the option were exercisable immediately. In practice the option will be the right to buy a share at a fixed price on a future date, and to get the value of that we need to use all the formulae.)
May 31, 2013 at 8:35 pm
May 31, 2013 at 8:34 pm
John you are God sent! what will we do without you and opentuition?!
Thank you so much for teaching me how to get more value using a scientific calculator!
May 31, 2013 at 8:31 pm
This is invaluable! I have a scientific calculator and i had no idea how all this buttons worked ln and e* now you have educated me on the standard normal distribution table! whew u saved me a head ache. for a while there when i saw the formulae i imagened it must be some enginering formulae forgotten on P4 paper by error!
It means this paper should have more calculations and less writing , how then are we expected to mix the two?! I mean just one question on options is enough to give one a head ache. God have mercy on us!
But Thank God for Opentuition iam confident iam finalising and passing this June 2013 exams. Watch this space i will update u all. John you are our guardian angel!
May 9, 2013 at 10:26 pm
Example 4. When the lecturer was doing the call option formula, he made a mistake and put t=.4 when it should be .25… so answer is actually 4cents and not 5cents…. whew
March 21, 2013 at 9:28 pm
Thank you very much for an invaluable lecture! You are brilliant, concise and straight to the point! Really appreciate the assistance.
May 13, 2013 at 12:06 am
January 26, 2013 at 1:04 pm
You do help clarify all these complicated issues.
Thank you for all ur effort.
Benefit a lot
October 14, 2012 at 1:19 am
please verify that on the last question,the “T” you used is annual and not adjusted for 3 months as it should be 0.25 and not 0.4.
October 14, 2012 at 1:55 pm
@dladla, You are correct – sorry. I used the correct T for calculating d1 and d2, but then made a mistake in the equation for c.
You can see the correct answer at the back of the Course Notes.
October 3, 2012 at 6:15 pm
September 3, 2012 at 1:07 pm
I have failed to view the lectures.
they are not running. Please help
September 3, 2012 at 5:51 pm
Try another browser
June 2, 2012 at 6:44 am
thanks, i know how to use the formulaes ald…
May 31, 2012 at 6:32 am
May 20, 2012 at 3:53 pm
Wonderful lecture. I picked up a great deal! Keep it up
April 13, 2012 at 2:49 am
great explanation here!
February 20, 2012 at 9:50 am
Isn’t it possible to incorporate video speed controls within the player? It would really help since some may never have enough time to watch at the normal speed. I would request you to consider takling to the company providing the streaming and update if possible.
October 20, 2011 at 2:58 pm
pls fix the techinal problem of this lecture i am reling on it its not running after 15 mins.
October 20, 2011 at 2:54 pm
the lecture is not running after 15 mins
May 27, 2011 at 8:59 am
my calculator isgivig wrong answer on the In(pa/pe) maybe im getting it wrong. whos is there to help me???
May 22, 2011 at 1:45 am
thanks a lot…i didnt look at the answer in the notes just checked my answer against the video 😀 thanks a lot
May 21, 2011 at 5:11 pm
Thanks for your comments.
You are correct that it is e^-0.025, but that is what is in the answer to example 5 in the notes. I think the answer is correct.
May 21, 2011 at 2:26 pm
Also, thanks everything for putting these valuable lectures online, is even better and more thorough than Kaplan!! 😀
May 21, 2011 at 2:24 pm
i think the example 5 is wrong when working the call & put option, my e^-rt is actually e^-0.1*0.25; i.e. e^-0.025 or have i missed something? thanks
April 25, 2012 at 9:48 am
It seems the tutor made an error in the lecture (example 5 around 53:01) where he says the ‘t’ in e^-rt is 0.4 instead of 0.25 (3months).
But if you look at page 144 in the OT notes, the answer to example 5 in chapter 13 (share options and option pricing) shows the correct figure, t = 0.25.
Brilliant lecture, I’ve picked up a lot more from here than I did in class! Thank you!
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