Black-Scholes A call option matures in six months. The underlying stock price is $87 and the stock's return has a standard deviation of 34 percent per year. The risk-free rate is 4 percent per year, compounded continuously. If the exercise price is $0, what is the price of the call option? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Call option price
Answers
The price for the call option is $87.
To calculate the price of the call option using the Black-Scholes formula, we need the following inputs:
Underlying stock price (S): $87
Exercise price (X): $0
Time to maturity (T): 6 months (0.5 years)
Risk-free rate (r): 4% per year (0.04)
Standard deviation of stock returns (σ): 34% per year (0.34)
Using these inputs, we can calculate the price of the call option using the Black-Scholes formula:
d1 = [ln(S/X) + (r + (σ^2)/2) * T] / (σ * sqrt(T))
d2 = d1 - σ * sqrt(T)
Call option price = S * N(d1) - X * e^(-rT) * N(d2)
Where:
ln represents the natural logarithm
N() represents the cumulative standard normal distribution function
Now, let's calculate the price of the call option:
d1 = [ln(S/X) + (r + (σ^2)/2) * T] / (σ * sqrt(T))
= [ln($87/$0) + (0.04 + (0.34^2)/2) * 0.5] / (0.34 * sqrt(0.5))
Note that the exercise price is $0, which can result in division by zero in the formula. However, in such cases, the price of a call option with an exercise price of $0 is simply equal to the current stock price.
Call option price = $87
Therefore, the price of the call option is $87.
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Related Questions
Discuss the effects of price controls when the demand isa. Elasticb. InelasticHint: You are required to show whether there is a deadweightloss
Answers
rice controls can create shortages and deadweight loss in both elastic and inelastic demand situations, but the extent of the shortage and deadweight loss may be greater in elastic demand cases due to the higher sensitivity of consumers to price changes.
The effects of price controls on elastic and inelastic demand, as well as discuss the presence of deadweight loss.
When demand is elastic, consumers are more sensitive to changes in price. If a price control, such as a price ceiling (maximum price allowed), is implemented below the equilibrium price, it can result in a shortage of goods. This is because producers are not willing to supply enough goods at the lower controlled price, while consumers demand more due to the lower price. In this scenario, there is a deadweight loss, as both consumer and producer surplus are not maximized.
On the other hand, when demand is inelastic, consumers are less sensitive to changes in price. If a price control, like a price ceiling, is set below the equilibrium price, it can still result in a shortage. However, the shortage is smaller compared to the case of elastic demand, as consumers are less likely to significantly increase their demand at a lower price. In this case, there is also a deadweight loss due to the inefficient allocation of resources, as the potential consumer and producer surplus are not fully realized.
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Suppose, for instance, that a mechanic attempts to involve the car owner in performing some of the simple tasks involved in tuning up the car. Assume these tasks include removing the water pump, changing the air filter, gapping and replacing the spark plugs, and replacing defective distributor cables. What are the legal implications of allowing customers to be in the working area? If the customer is injured, who is responsible for healthcare costs? Who is liable for poor workmanship or failures? How is quality maintained when the skills of customers are variable?
Answers
Allowing customers in the working area during car maintenance tasks may have legal implications, particularly regarding the responsibility for healthcare costs if the customer is injured. The mechanic could be held liable for poor workmanship or failures, while the specific circumstances and applicable laws determine the extent of responsibility. Maintaining quality can be challenging when customers have varying skills, but mechanics should ensure professional standards are met regardless of customer involvement.
When customers participate in car maintenance tasks, there are legal implications to consider. If a customer sustains an injury, the responsibility for healthcare costs depends on the circumstances. If the injury resulted from the customer's actions, they may be responsible. However, if the mechanic's negligence contributed to the injury, the mechanic may be held liable for the healthcare costs. Similarly, the mechanic is generally responsible for poor workmanship or failures that occur during the maintenance tasks. To maintain quality, mechanics must provide clear instructions to customers and ensure that all tasks are performed to a professional standard, regardless of the varying skills of the customers. This helps mitigate potential issues and uphold the quality of the work performed.
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highlight four reasons why a seller would prepare a proforma invoice???
Answers
Answer:
Pro forma invoices are sent to buyers ahead of a shipment or delivery of goods or services. Most pro forma invoices provide the buyer with a precise sale price. A pro forma invoice requires only enough information to allow customs to determine the duties needed from a general examination of the included goods.
Explanation:
hope i help
Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of?
Answers
Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of moral hazard.
Moral hazard is the risk which a party has not entered into a contract in good faith or it could have provided misleading information about its assets or liabilities, or credit capacity
Moral hazard also sometime mean a party who has an incentive to take unusual risks in a desperate attempt to earn more profit before the contract settles.
Moral hazards are present at different times especially when the two parties come into agreement with one another. Each party related to the contract do have the opportunity to gain by acting contrary to the principles which are already laid out by the agreement.
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Elaine just accepted a new job and is working with the company's HR department to fill out
paperwork. Which of the following steps is she responsible for?
a. Determine how much tax to withhold from her paychecks based on W-4 information
b. Complete a W-4 form
c. Send withholding amounts to the
federal government
d. Complete a W-2 form
Answers
As a new person that has been accepted to the new Job that has to fill the HR of the company, what she is going to be responsible for would be to Complete a W-4 form.
What is a W-4 form?W-4 form is the term that is used to refer to the form that thet the people that are employed in a particular organization would have to fill. The form would have to tell the amount of money that the employee is to withhold from your pay as the tax that you are to pay to the government as your income.
The other term that the form is used to be called is the employee withholding certificate because of the work that the form is meant to achieve.
Hence we would have to say that the steps that Elaine is going to be responsible for filling would be the employee withholding for the business to take her federal taxes for the government.
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The smaller the GDP, the larger the economy.
Answers
Answer:
Real gross domestic product is an inflation-adjusted measure
price levels and provides a more accurate figure of economic growth
This means that if inflation is positive, real GDP will be lower than nominal, and vice versa
at the end of each quarter, patti deposits $500 into an account that pays 12% interest compounded quarterly. how much will patti have in the account in three years?
Answers
The account Patti owns will have $7096 in three years as per the compound interest.
Step- by- step explanation of compound interesttotal Quantum A = \(s( frac{( 1 frac{ r}{ n}){ n * t}- 1}{ frac{ r}{ n}})(/ tex)\)
this is the formula used when certain quantum is added at regular intervals and if the interest is COMPOUNDED)
then,
s = deposit added at the end of each quarter = $ 500
n = number of times interest is compounded per unit' t' = 4
t = total time = 3 times
r = interest rate (expressed in numeric or bit not in) = 12/100 = 0.12)
A = 500\(( frac{( 1 frac{0.12}{ 4}){ 4 * 3}- 1}{ frac{0.12}{ 4}})(/ tex)\)
by working further,
A \(=500(\frac{1.03)^{12}-1 }{0.03} )\\ \\ 500(\frac{1.42576-1}{0.03} )\\\\500(\frac{1.42576}{0.03})\\ \\=7,096\)
(1.03) 12 = 1.42576(roughly)
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a firm has a debt-to-equity ratio of 1:4. the wacc is 18.6%, and the pretax cost of debt is 9.4%. what is the cost of common equity if the tax rate is 21%? please enter your answer as a percent rounded to two decimal places
Answers
The cost of common equity is 20.54% rounded to two decimal places.
The cost of common equity can be calculated using the formula: Cost of Common Equity = WACC - ((Debt/Equity) x (WACC - Pretax Cost of Debt)).
First, we need to calculate the proportion of debt and equity in the firm's capital structure. The debt-to-equity ratio of 1:4 means that the firm has $1 of debt for every $4 of equity. Therefore, the proportion of debt and equity can be calculated as:
Debt/(Debt + Equity) = 1/(1+4) = 0.20
Equity/(Debt + Equity) = 4/(1+4) = 0.80
Next, we can substitute the given values into the formula:
Cost of Common Equity = 18.6% - ((0.20) x (18.6% - 9.4%))
Cost of Common Equity = 18.6% - (0.20 x 9.2%)
Cost of Common Equity = 16.18%
Finally, we need to adjust for the tax rate of 21%:
Cost of Common Equity = 16.18% / (1 - 21%)
Cost of Common Equity = 20.54%
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pls help!!!!
answer the following questions using complete sentences. Each answer should contain 3–5 sentences.
What do you think is the most important event in the history of the internet? What event has had the biggest impact on your daily life?
What is your prediction for the future of the internet in the next 20 years?
Answers
1. one of the most important even i think would be in 2007 when apple created the very first mobile internet (this could also apply to you too)
2. what u think will happen in the next 20 years is that we are going to move away from mobile devices and towards maybe a chip in your head or a sort of device something similar to VR
Post the journal entries to the T-accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal. We will post to the accounts one transaction at a time. Begin by posting the events from the 1st. July 1: Yarwood contributed $ 68 comma 000 cash to the business in exchange for Common Stock. (We will post to the accounts one transaction at a time. Post only the transaction from July 1 in this step.)
Answers
Answer:
Dr Cash $68,000
Cr Common Stock $68,000
Explanation:
1st July
The entry to record the capital investment of Yarwood who contributing $68,000 in cash would result in an increase in common stock and increase in company cash balance which means that increase in common stock must be credited and increase in cash balance must be debited.
Dr Cash $68,000
Cr Common Stock $68,000
1.
There are three main credit reporting bureaus -- Equifax, Experian, and TransUnion. How
frequently can you request and receive a free credit report from each bureau?
Answers
Every Credit user is entitled to a free credit report every 12 months (1 years) from either of Equifax, Experian, or TransUnion.
What are credit reporting agency?These are agency that maintains only an historical credit information on individuals and businesses.
The maintained historical credit information helps in preparation of the credit report and score of all individuals and businesses in United states..
In U.S., the three main credit reporting bureaus includes the Equifax, Experian and TransUnion.
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1. Buyers, sellers, and producers all have someone else they are competing with for economic benefits. This is known as:
O competition
O monopoly
O collusid
O cartels
Answers
Answer:monopoly
Explanation:
Yasmine plans to attend a four-year public university. She expects she will need to contribute $9,000 annually to her education. Which savings plan will help Yasmine save enough money to pay for one year of school, regardless of whether or not interest is earned on her savings? $600 per month for 1 year $350 per month for 2 years $225 per month for 3 years $200 per month for 4 years
Answers
Answer:
It be D: $200 per month for 4 years is the correct answer.
Explanation:
$9,000/200= 45 months = 4years
What is product positioning?
Answers
Answer:
Product positioning is the process of thinking and communicating about how you want your market to think and feel about your product. Successful product positioning requires your team to articulate.
Explanation:
Risky Business Insurance Company insures business clients against unexpected disasters such as tornadoes and floods. The company operates in several regions in the U.S., and negotiates contracts following standard insurance industry guidelines. A strategic business guideline that the company would follow is
Answers
A strategic business guideline that the company would follow is: C. The company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas.
What is insurance?Insurance can be defined as the coverage that help to cover expenses or cost incase of unforeseen or unexpected circumstances such as fire accident, theft etc.
Hence, the strategic business guideline that the company would follow is option C which stated that the company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas.
The missing options are:
A. The amount of loss should be equal to or less than a loss covered by a competitor company.
B. There should be documentation that clearly attests to the fact that the loss of buildings, equipment, and even lives is not measurable.
C. The company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas.
D. All insurance companies that sell similar insurance would equally divide the number of claims, so as not to compete unfairly against each other.
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Select the false statement about a budget
A budget balances net income and expenses.
A budget provides input to financial planning.
A budget is an emergency fund.
A budget should be reviewed regularly.
Answers
the broad term referring to the practical applications of science and knowledge to commercial and organizational activities is called blank . multiple choice question. technology social investment social networking shared value
Answers
A broad term referring to the practical applications of science and knowledge to commercial and organizational activities is called Technology. The correct option is A.
Technology is the use of knowledge to accomplish practical objectives in a repeatable manner. The term "technology" can also refer to the outcomes of such endeavours, encompassing both material tools—such as machinery or utensils and immaterial ones such as software. In research, engineering, and daily life, technology is essential.
Society has undergone substantial transformation as a result of technological breakthroughs. The earliest technology that has been identified is the stone tool, which was employed during prehistoric times. This was followed by the ability to regulate fire, which helped the human brain expand and language to emerge during the Ice Age. The development of the wheel during the Bronze Age facilitated greater travel and the development of more sophisticated machinery.
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Which economic effect does a central bank hope to achieve by buying back large amounts of treasury security
Answers
A. It hopes to reduce the amount of money available for lending.
Explanation:
Usually, the central bank(Federal reserve) control the supply of money in circulation in the economy so that the nation's economy would be healthy. One of the ways through which the federal reserve controls the quantity of money in circulation is by selling or purchasing of government securities through a process known as open market operation.
If the federal reserve sells government securities such as treasury bills, in large quantities, its aim is to reduce the amount or quantity of money available to commercial banks for lending, hence mop up the quantity of money in circulation.
Also, if the federal reserve buys government securities, its aim is to make more money available in large quantities to commercial banks and other institutions, hence have more cash to lend people.
The economic effect that central bank are trying to effect by the process of buying back large amounts of treasury security is bring reduction to amount of money available for lending.
Treasury notes as well as bonds are securities that brings about payment of fixed rate of interest which is usually done every six months till the security reach a stage of maturity.The central bank do buy large amounts of treasury security so that the money that can be available for lending can be reduced.Therefore, this process are put in place to balance the economy.
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2. what are the primary procedures used to audit cash balances? what significant inherent and control risks present at peregrine would impact the nature and extent of the procedures to be performed?
Answers
The primary procedures used to audit cash balances are listed as follows: 1. Confirm cash with banks. 2. Test bank reconciliations. 3. Analyze significant transactions. 4. Test controls over cash. The significant inherent and control risks that present at Peregrine and that would impact the nature and extent of the procedures to be performed include the following: Inherent risks are related to the company's inherent vulnerabilities. Control risks arise from a lack of internal controls.
The primary procedures used to audit cash balances are listed below:
1. Confirm cash with banks: It involves obtaining a bank statement or other confirmation from a third-party bank to confirm the accuracy of the cash balance recorded in the financial statements.
2. Test bank reconciliations: This procedure involves verifying that the cash balance recorded in the company's accounting records agrees with the bank balance listed on the bank statement.
3. Analyze significant transactions: It is essential to review significant transactions to see whether they were correctly recorded, such as wire transfers and check deposits.
4. Test controls over cash: Evaluating internal control procedures such as cash counting, check-to-sign, and reconciliations is necessary to determine whether the company's cash-related activities are appropriately monitored and regulated.
The significant inherent and control risks that present at Peregrine and that would impact the nature and extent of the procedures to be performed include the following:
Inherent risks are related to the company's inherent vulnerabilities. Peregrine's inherent risk could arise from a lack of segregation of duties, improper cash handling, inadequate reporting, etc.
Control risks arise from a lack of internal controls. Peregrine's control risks could arise from poor oversight and monitoring, inadequate financial reporting, ineffective internal auditing, etc.
The nature and extent of procedures to be performed would have to be adapted to address the identified risks. A thorough evaluation of the controls in place for cash, testing of their effectiveness, and a review of the transactions recorded are crucial to minimizing the potential risks.
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What would happen if you had $30 in your checking account and you tried to take out $45 at the grocery store using your debit card?
Answers
Answer:
I believe that the transaction would fail giving you some text similer to "Transaction failed, please try again." or "Insufficient funds."
A bond has a macaulay's duration of 10.7 years. if rates fall from 7% to 6%, the bonds price will:______.
Answers
The Macaulay's duration of a bond is 10.7 years. Bond prices will increase by around 10% if rates drop from 7% to 6%.
The Macaulay duration estimates the weighted average period that a bond must be kept until its entire present value of future cash flows equals its purchase price. It is frequently employed in bond immunization techniques.
By multiplying the time period by the periodic coupon payment and dividing the resultant value by 1 plus the periodic yield rising to the maturity date, the Macaulay duration is determined.
1.86 years, or 3.7132 semiannual intervals, make up the Macaulay Duration. With all other factors being equal, the amount of the % change increases (decreases) with the length of the bond's term, n.
Modified Duration = Macaulay's duration/(1 + i)
= 10.7/1.07
= 10
% Change in Price = -Modified duration × Change in interest rates
= -10 × -1%
= 10%
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What does it mean if a good is inelastic in economics?
Answers
It means if a good is inelastic in economics refers to increase in price regardless you care for revenue or profit.
Inelastic in economics refers to the static quality of a good or service when its price changes. The demand of inelastic means that when the prices goes up then consumers buying habits stay same even with the price goes down.
Inelastic in economics, inelastic goods are those commodities whose demand does not change with the price variations. An increase or decrease in the product's price level does not effect its demand. Even though there will be a slight variation in demand, it will be insignificant compared to the change in price.
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Can someone help me with this?
You are responsible for an automobile accident. Use the information below to determine:
The total amount your liability insurance will pay for the accident
The total amount your collision insurance will pay for the accident
The number of additional damages you are responsible for as a result of the accident
You and the driver of the other car were the only people involved in the accident. There were no injuries from the accident.
You have a 50/100/50 liability insurance policy with no deductible
You have collision insurance with a deductible of $500
The other car was valued at $25,000 and requires $10,000 in repairs
Your car was valued at $20,000 and requires $15,000 in repairs
Answers
Answer:
omg you have any idea
Answer:
Based on the type of insurance you have and the people involved in the accident, the total amount of liability you will pay is $25,000.
The total amount that your collision insurance will pay is $24,500 and the amount of additional damages you will pay is $0.
What is the total amount you will pay?
The coverage is 50/100/50 means that the insurance company will pay up to $50,000 for damages.
This means that the cost to repair both cars will be covered as it is less than $50,000:
= 10,000 + 15,000
= $25,000
There will be no additional damages.
The amount you will pay personally will be the $500 deductible which means that insurance will pay:
= 25,000 - 500
= $24,500
You are putting together your first post-graduation budget. your take-home pay will be $2,500 per month. you estimate your monthly costs to be rent of $900, car related expenses to be $550, entertainment of $200, food expense of $250, cable bill of $75, mobile phone of $100, student loan payment of $400 and other expense of $150. how would you describe your budget after analyzing all of your income and expenses?
Answers
After analyzing all income and expenses, we have a budget deficit of $125.
What is a budget?A budget is a math game, usually financial, but not always, for a specific period of time, usually a year or a month.Projected sales and revenue figures, resource quantities (such as time, costs, and expenses), environmental impacts (such as greenhouse gas emissions), other impacts, assets, liabilities, and cash flows should all be included in the budget. A budget is a quantitative way for businesses, governments, families, and other groups to articulate strategic action plans. Planned expenditures are formulated in the budget along with funding proposals.A budget has a surplus of resources for later use, or a deficit when spending is more than income or other resources.Learn more about budget, here
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The ---------------- enforce(s) procedures allowing employees to vote to have a union and for collective bargaining
A. Fair Labor Standards Act
B. National Labor Relations Board
C. Civil Rights Acts
D. Occupational Safety and Health Department
Answers
B. National Labor Relations Board option enforces procedures allowing employees to vote to have a union and for collective bargaining.
The National Labor Relations Board (NLRB) enforces procedures allowing employees to vote to have a union and for collective bargaining. The NLRB has the authority to examine and correct illegal labor practices, which are already defined in Section 8 of the Act as given below: interfere with two or more than two employees performing in concert to defend rights granted for in the Act, to control or intervene with the administration of a labor organization, to specify against an employee from engaging in union activities or avoiding from them, to discriminate against an employee for depositing any type of charges with the NLRB or becoming part in any NLRB procedures, to refuse to negotiate with the union that is the legal spokesperson of its employees.
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Rachel uses a software at work that allow her to organize and manage large amounts of data that needs to be viewed quickly. this software can also be tied to other software allowing the manipulation of large amounts of data used for producing reports and documents. which software is rachel using?
Answers
Rachel is using a powerful software called a data management system.
Which powerful software is Rachel utilizing to efficiently organize data as well as generating reports and documents?Rachel is utilizing a powerful software known as a data management system (DMS) to effectively organize and manage the large amounts of data she encounters in her work.
This software enables her to swiftly view the data, allowing for quick analysis and decision-making. Additionally, the DMS can be integrated with other software applications, enabling seamless data manipulation for the purpose of generating reports and documents.
This data management system and how it empowers users like Rachel to handle extensive data sets and streamline their work processes.
By leveraging this software, Rachel can effectively organize, store, and retrieve large amounts of data in a way that enables swift viewing and analysis.
Moreover, the software's integration capabilities allow Rachel to link it with other software tools, facilitating seamless data manipulation and facilitating the production of comprehensive reports and documents.
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Helpmeeeeeeeeeeeeeee
Answers
Answer:
18. b : most economic decisions are made by buyer and sellers
19. b : federal income tax
Explanation:
Which level of the legal environment oversees intellectual property laws?Which level of the legal environment oversees intellectual property laws?
Answers
Answer:
Intellectual property means the rights to dispose of works, inventions and other results of the process of human creativity, research and thought. These are the various results of more or less original ideas, instructions and solutions. Due to its intangible nature, only what is considered appropriate by the company for protection by law can be considered intellectual property, so it should generally be the results of creation, research or other activities that are sufficiently unique or original. The value of intellectual property rights is usually less difficult to determine than for physical property, it depends mainly on the degree of their subsequent use and benefit for individuals or society and the ability to support further creations.
How do differences in the national income of different countries affect their economic development ?
Answers
Answer:
National is the total number of goods and services produced in a country in a given year.
Explanation:
National Income is simply a country's wealth and it goes a long way in shaping the economic development of a country. From, the definition of national income, we should know that every country national income( i.e the net amount of income of the citizens by production in a year) will differ hence, the difference in their economic development.
National Incomecan be classified in to two namely:
GDP: Gross domestic product is the aggregate value of goods and services produced in a country. it is used to measure a country 's economic growth.
GNP: Gross National Product on the other hand is the estimated value of the final goods and services produced by a country during a specific period of time (usually a year),before allowance is made for the depreciation or consumption of capital used in the process of production.
IF country A GDP is 52,000 while that of Country B is 45,000. We can say country A is economically developed than country B. i.e Country A is experiencing more positive growth than country B.
This explains a vivid answer to the above question as all country can not grow at the same rate since their national income differs. the higher the national income of a country, the better it is from others.
What is a benefit of using digital advertising in conjunction with organic marketing efforts? Select all that apply.
Answers
The benefits of using digital advertising in conjunction with organic marketing efforts are;
Remarket to existing contacts and website visitors.Use analytics to better understand your audiences across platforms.Optimize your ad content to perform its best across channels.What is Digital advertising?Digital advertising can be regarded as the act of promoting content to users using online as well as digital channels.
However, when using digital advertising in conjunction with organic marketing efforts, it is possible to make use of analytics to better understand your audiences across platforms.
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