3 The managers of Daylon plc are reviewing the company’s investment portfolio. About 15% o
Other information:
(i) The current market price of Mondglobe’s ordinary shares is 360 pence.
(ii) The annual volatility (variance) of Mondglobe’s shares for the last year was 169%.
(iii) The risk free rate is 4% per year.
(iv) No dividend is expected to be paid by Mondglobe during the next six months.
Required:
(a) Evaluate whether or not the price at which the investment bank is willing to sell the option is a fair price.(10 marks)