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- This topic has 5 replies, 2 voices, and was last updated 10 years ago by
John Moffat.
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- May 29, 2014 at 5:33 pm #171687
In a qs which contains options at for eg 3 different exercise prices,do we have to perform the calculations for all 3 exercise prices or just take the one which would give the lowest rate(most favorable)to the co.?
Thanks
May 30, 2014 at 11:09 am #171868If you have the time then you should do the calculations for all of them (otherwise how will you know which one ends up most favourable?).
The main thing for the marks, however, is to prove that you understand how options work (even if you do not have the time to do all of them).
May 30, 2014 at 5:05 pm #171949Cant we just assume that the one which is at the lowest int rate is the best(ignoring the premiums payable)and using that int rate for the calculations?
May 30, 2014 at 5:08 pm #171952No, because the effective rate could end up being higher because of the premium.
May 30, 2014 at 6:45 pm #171970Thanks alot Sir.
May 30, 2014 at 6:47 pm #171971You are very welcome 🙂
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