I read in a marking scheme that candidate will be given full credit if he/she has used one strike price and provided a justification for using that one and not the other.
Please guide me regarding the appropriate justification as this would earn me the extra mark or two and save me from doing long repeated calculation for it
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Strike Price
8y ago#1It depends on exactly what the question asks for.
There is no 'best' strike price when using options - getting a lower limit will cost more in premium (and the premium will be 'wasted' if the option is not exercised). You can only really justify one particular strike price if the question makes it clear what limit the company wants.
Otherwise you should ideally show the result for all of the strike prices, although if you are short of time you would still get most of the marks by showing the workings for just one of them - the main thing is to prove that you know how options work.
Okay, thanks Mr. Moffat.
P4 in 38 minutes. Hope it's my last ACCA exam.
8y ago#3You are welcome, and I hope all goes well in your exam :-)
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