4.6. Nui and Ginko bought Handa Studios by investing $1.5 million each. Nui was
ID: 2712709 • Letter: 4
Question
4.6. Nui and Ginko bought Handa Studios by investing $1.5 million each. Nui was a stockholder, and thus the owner of the company. Initially, the corporation agreed to pay Ginko $3 million after ten years for his share of the business. However, by mutual agreement, they sold the studio after 6 years for $5.5 million and divided the money according to the option pricing theory. The riskless rate at the time was 3.6%, and the of Handa Studios was 0.41. Find the amount of money that went to Nui and to Ginko.
Answer: Nui = $3,190,026, Ginko = $2,309,974. Find the solutions.
Explanation / Answer
Stock Price = $5.5million
Exercise Prise = $3 million
Rate = 3.6%
Annualized Volatiliy = ^2 = .41^2 = 16.81%
Time to maturity = 4
Black-Scholes Value calculated using Black-Scholes Calculator = 4.201%
GINKO SHARE = $5,500,000 x 0.4201 = $2,310,555
Nui = $5,500,000 - $2,310,555 = $3,189,445
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