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Hi John,
I posted this question as a reply to another thread but I don’t think it submitted properly.
Could you tell me why the exercise price of $35m is not discounted at 11% for two years like the other cash flows, please? And would this be the case for any question of this nature?
Many thanks
Andrew
As I do explain in my free lectures on this, the last term in the BS formula (with ‘e’ in it) is effectively discounting Pe on a continuous basis. So we do not discount it again.
This is always the case.
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