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Technology Stocks : Intel Corporation (INTC)
INTC 47.65+0.8%11:51 AM EST
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To: Elmer Phud who wrote (177808)5/6/2004 8:07:48 PM
From: Robert O  Read Replies (1) of 186894
 
No I don't see. A zero coupon bond will be paid interest so you can calculate it because you know what it will be. The option is not guaranteed of ever having any tangible value. Until the grantor suffers an expense there just isn't any expense. IMO.

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Ahh I see the problem. You need to apply a little statistical probability reasoning to this issue.

Just for sake of argument and ease if I told you that a one year option at grant could not be valued exactly but *could* be estimated by applying statistical methods that had, say, a 90% confidence interval and there was:

a 10% chance the option would be valueless after one year
a 30% chance the option would be worth $800 after one year
a 60% chance the option would be worth $1,500 after one year

would you still claim that since there is SOME probability it will be worth zero in a year we MUST assume zero expense until the year is up (in real world much longer than a year)???

RO
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