10. A stock's price follows a lognormal model. You are given: (i) So = 80, (ii) a = 0.1, (iii) o = 0.25, and (iv) 8 = 0.03. A European call option on the stock with strike price 80 expires in 6 months. Calculate the probability that the option pays off. (A) 0.344 (B) 0.388 (C) 0.422 (D) 0.482 (F) 0.544

10. A stock's price follows a lognormal model. You are given: (i) So = 80, (ii) a = 0.1, (iii) o = 0.25, and (iv) 8 = 0.03. A European call option on the stock with strike price 80 expires in 6 months. Calculate the probability that the option pays off. (A) 0.344 (B) 0.388 (C) 0.422 (D) 0.482 (F) 0.544

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4MC

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Similar questions

1. Consider a 4 month European put on a stock with no dividend the follow- ing parameters: S(0) = 305, K (a) Compute the option's vega (b) If o increases by 0.01, what is the approximate increase in the value of the option? 300, r = 0.08, o = 0.25
Suppose a stock is currently trading for $35, and in one period it will either increase to $38 or decrease to $33. If the one-period risk-free rate is 6%, what is the price of a European put option that expires in one period and has an exercise price of $35? $0.51 $2.32 $1.55 $3.00 $0.76
3. A stock S(0) 100 will go up to 105 or down to 95 in one time step (time T). Suppose eT 1.025. What is the present value of a put option with strike K 99 and expiry T? = =
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