(a)
To calculate:
If the high water mark is
Introduction:
The Black-scholes model is used for determining the price of European call option by using the variation of price in financial instruments. This model uses stock price, option price, and time for ascertaining the call option price.
Answer to Problem 11PS
The annual incentive fee is
Explanation of Solution
Given:
The black-scholes formula is as follows:
For calculating the
Now the calculation of
The value of
Thus, the value of
Now, the calculation of
The value of
Thus, the value of
By substituting the values, value of call option is:
Thus, the value of call option is
The computation of value of incentive fee is as follows:
Thus, the annual incentive fee is
(b)
To calculate:
If the high water mark is zero and asset value is
Introduction:
The Black-scholes model is used for determining the price of European call option by using the variation of price in financial instruments. This model uses stock price, option price, and time for ascertaining the call option price.
Answer to Problem 11PS
The annual incentive fee is
Explanation of Solution
Given:
The value of X is changed to
The black-scholes formula is as follows:
For calculating the
Now the calculation of
The value of
Thus, the value of
Now, the calculation of
The value of
Thus, the value of
By substituting the values, value of call option is:
Thus, the value of call option is
The computation of value of incentive fee is as follows:
Thus, the annual incentive fee is
(c)
To calculate:
If the high water mark is zero and asset value is
Introduction:
The Black-scholes model is used for determining the price of European call option by using the variation of price in financial instruments. This model uses stock price, option price, and time for ascertaining the call option price.
Answer to Problem 11PS
The annual incentive fee is
Explanation of Solution
Given:
The black-scholes formula is as follows:
For calculating the
The value of X has been changed which is:
Now the calculation of
The value of
Thus, the value of
Now, the calculation of
The value of
Thus, the value of
By substituting the values, value of call option is:
Thus, the value of call option is
The computation of value of incentive fee is as follows:
Thus, the annual incentive fee is
(d)
To calculate:
If the high water mark is zero and asset value is
Introduction:
The Black-scholes model is used for determining the price of European call option by using the variation of price in financial instruments. This model uses stock price, option price, and time for ascertaining the call option price.
Answer to Problem 11PS
The annual incentive fee is
Explanation of Solution
Given:
The value of X is changed to
The black-scholes formula is as follows:
For calculating the
Now the calculation of
The value of
Thus, the value of
Now, the calculation of
The value of
Thus, the value of
By substituting the values, value of call option is:
Thus, the value of call option is
The computation of value of incentive fee is as follows:
Thus, the annual incentive fee is
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- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT