The 6-months risk free rate is equal to 2% (Rf = 2%). By the end of the 6 %3D months period the stock will either increase by a factor of 1.3 or fall by a factor of 0.8. The current stock price is $110. Find the current price of the one year At the Money Call option relying on the replication approach. Use four decimal places in all calculations.

The 6-months risk free rate is equal to 2% (Rf = 2%). By the end of the 6 %3D months period the stock will either increase by a factor of 1.3 or fall by a factor of 0.8. The current stock price is $110. Find the current price of the one year At the Money Call option relying on the replication approach. Use four decimal places in all calculations.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A stock has a price of $37 and an annual return volatility of 59 percent. The risk-free rate is 3.13 percent. Perform calculations in Excel. a. Calculate the European call and European put option prices with a strike price of $38.00 and a 90-day expiration. (Use 365 days in a year. Do not round Intermediate calculations. Round your answers to 2 decimal places.) Call premium Put premium b. Calculate the deltas of the European call and European put. (Use 365 days In a year. A negative value should be Indicated by a minus sign. Do not round Intermediate calculations. Round your answers to 4 decimal places.) Call delta Put delta
Consider an American put option (K=$100) expiring in one year on a stock trading for $84. The return volatility on the stock is 27.3% and the riskless rate is 5%. Find the price of the option using a Binomial Model with two steps. (Respond with two decimal places, such as "-12.34") 26.59 Correct Answer: 18.28
The current price of a stock is $18. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. $
The current spot price of a stock is $89.00, the expected rate of return is 9.8%, and the volatility of the stock is 18%. The risk-free rate is 3.3%. Assume the log-normal model. (a) Calculate the Delta A. and Vega v. of a European call with strike $94.00 expiring in 14 months. Enter your solution for A, to three decimal places. Enter your solution for v. as a dollar value to two decimal places. Ac = Vc = (b) Calculate the Delta A, and Vega v, of a European straddle with strike $94.00 expiring in 14 months. Enter your solution for As to three decimal places. Enter your solution for v, as a dollar value to two decimal places. As =
Compute the difference in price of American put option and European put option using 2- step binomial option on a stock that is selling at $42. The options will expire is 6-months and the risk-free rate is 12%. In each three-months period the price of stock will be either 10% high or 10% low. (A) $0.42 (B) $2.24 (C) $0.65 (D) S0.52
What are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Stock price=$79Exercise price=$75Risk-free rate=3.50% per year, compounded continuouslyMaturity=5 monthsStandard deviation=58% per year
The current price of a stock is $21. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $22 and that expires in 1 year. (Hint: Use daily compounding.) Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.
What are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Stock price = $74 Exercise price = $70 Risk-free rate= Call price Put price 4.40% per year, compounded continuously Maturity = 4 months Standard deviation = 62% per year
Calculate the value of a call option for the following stock. Use the Black-Scholes formula. Time to expiration Standard deviation Exercise price Stock price Annual interest rate Dividend 6 months 50% per year $50 $50 3% 0 (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of a call option
The current price of a stock is $15. In 6 months, the price will be either $18or $13. The annual risk-free rate is 6%. Find the price of a call option on thestock that has a strike price of $14 and that expires in 6 months. (Hint: Usedaily compounding.)
Find the implied volatility (to 2 decimals, for example, �=8.23% ) of a Put option with a time to expiration of 11 months and a price of $6.13 The stock is currently trading at $47. The riskless rate is 2% per annum, and the strike/exercise price of the option is $50. Hint: compute the Put price using the same formula as in exercise 4 , as a function of the volatility �. Then use Solver to change the volatility cell in order to obtain a price of $6.13 \table[[�1=,-0.0614997,,So =,47],[�2=,,4,�=,50],[,,,�=,2%
Use the data in the figure 20.1 and calculate thepayoff and the profits for investments in each ofthe following January expiration options, assumingthat the stock price on the expiration date is $125.a. Call option, X=$120b. Put option, X=$120c. Call option, X=$125d. Put option, X=$125e. Call option, X=$130f. Put option, X=$130

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