Essay
(A) Construct a decision tree to help her model her option decision making. Make sure to label all decision and chance nodes and include appropriate costs, payoffs and probabilities.
(B) What is the optimal decision making policy regarding the options in all possible scenarios over the next two years?
(C) What is the expected value of the stock options? Ignore the time value of money (assume no discounting of future payoffs)
(D) If her estimates of the increases/decreases or probabilities are inaccurate, could the options have a negative EMV?
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(A) 
(B) The tree above shows that wheth...View Answer
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Correct Answer:
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(B) The tree above shows that wheth...View Answer
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