Q4. Y the results from the clinical trials: ou are doing research on a biotech...
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Q4. Y the results from the clinical trials: ou are doing research on a biotech firm. You think there are three scenarios for the drug depending on i. Not effective; li. Effective; ii. Super effective with probabilities of i 20%; ii. 6096; iii. 2096 respectively You believe the stock with be worthi.S0;il. $100; ii $200 under those scenarios eventually. Q4a what is the fair price of the stock today? (2 points) 04b. What is the MAD? (2 points) Q4c. What is the STDEV? (2 points) 04d. How much should an ATM call be priced at today? (ATM call has strike price at current stock price of $100) (4 points) Q4e. A preliminary trial was not very promising, which eliminates the chance of ii (ie "super effective"). What is the stock price reaction (what is the new price) and stock return upon the release of the trial result? (4 points)
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