Assume the delta of a call option on a firm's assets is .608.This means a project valued at $65,000 will increase the value of the firm's equity by:

Question

Quizplus · Accepted Answer

Delta measures the sensitivity of the option price to changes in the underlying asset value. In this case, the delta of the call option is 0.608, meaning that for every $1 increase in the value of the firm's assets, the value of the call option will increase by $0.608.

To calculate the increase in the value of the firm's equity, we need to multiply the change in the value of the assets by the delta:

Increase in equity = $65,000 * 0.608 = $39,520

Therefore, the correct answer is B.

Assume the Delta of a Call Option on a Firm's