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Hello tutor
In question no 1 from December 2014
An offer has been made by Lumi Co to sell the project after year 1 ,
is it indicating (real options) option to sell? is it possible to find out standard deviation from the given data?It is a real option but the standard deviation is not needed because you are not asked to use the Black Scholes model. As the examiner points out in his answer, BS is not relevant because we know the actual probabilities – BS is relevant when there is a whole range of possibilities.
It might help you to watch my lectures going through this question. They are linked from this page:
Ok thank you so much, watching this lecture
Which of the following is an acceptable way to start reportJust a simple line as examiner has written ” Report to the Board of Directors,Avem Co”
Or
To Board of Directors
Avem Co
Introductory paragraphIn old past papers they followed the 2nd approach
I mean this worth 4 marks I don’t wanna lose them with incorrect startBoth are fine, but best (and shortest) is to use the same sort of format as the current examiner does – spend a few minutes looking at a few of the recent exam questions that needed reports, and best is to copy his style 🙂
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