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 andperform the required analysis to answer the question below.XOpen spreadsheetFind the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round youranswer to the nearest cent.$

Answered: The current price of a stock is $18. In…

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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The current price of a stock is $20. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 7%. 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. Find the price of a call option on the stock that has a strike price is of $25 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.
Assume the following inputs for a call option: (1) current stock price is $23, (2) strike price is $28, (3) time to expiration is 5 months, (4) annualized risk-free rate is 5%, and (5) variance of stock return is 0.3. 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. Use the Black-Scholes model to find the price for the call option. Do not round intermediate calculations. Round your answer to the nearest cent.
Please answer the five questions below. You may attach a spreadsheet or enter the answers in this box 1. A one year call option has a strike price of 50, expires in 6 months, and has a price of $4.74. if the risk free rate is 3%, and the current stock price is $45, what should the corresponding put be worth?
the valuation of a European put option for a stock currently worth $200 with a strike price of $190 and expiry date 6 months from now, and whose value can rise or fall by 10% in each of the next two quarters. Assume a risk-free rate of 7.7%. You must use R, and submit your answer as a Quarto file knitted to a pdf.
The current price of a stock is $20. 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 thestock that has a strike price of $21 and that expires in 1 year. (Hint: Use dailycompounding.)
Turn back to Figure 20.1 , which lists prices of various IBM options. Use the data in the figure tocalculate the payoff and the profits for investments in each of the following January expirationoptions, assuming that the stock price on the expiration date is $125.a. Call option, X 5 $120.b. Put option, X 5 $120.c. Call option, X 5 $125.d. Put option, X 5 $125.e. Call option, X 5 $130.f. Put option, X 5 $130.
You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months time. If the stock is trading at $55 in three months, what will be the payoff of the call? Note: practice drawing the payoff diagram.
Excel Online Structured Activity: Black-Scholes Model Assume the following inputs for a call option: (1) current stock price is $29, (2) strike price is $35, (3) time to expiration is 4 months, (4) annualized risk-free rate is 4%, and (5) variance of stock return is 0.32. 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. Black-Scholes Model Current price of underlying stock, P $29.00 Strike price of the option, X $35.00 Number of months unitl expiration 4 Formulas Time until the option expires, t #N/A Risk-free rate, rRF 4.00% Variance, \sigma 2 0.32 d1 = #N/A N(d1) = 0.5000 d2 = #N/A N(d2) = 0.5000 VC = #N/A Use the Black-Scholes model to find the price for the call option. Do not round intermediate calculations. Round your answer to the nearest cent. $ fill in the blank.
A put option will mature in six months. The standard deviation of the underlying stock returns is 50% per year. The exercise price of the put option is $50 and the stock price is also $50. The risk-free interest rate is 3% per year. Using the Black- Scholes formula, what is the price of the put option? Show detailed work leading to your answer in the working sheet. $6.34 $7.08 $8.07 $3.64
A stock sells for $125. A call option on the stock has an exercise price of $110 and expires in 3 months.If the interest rate is 0.15 and the standard deviation of the stock’s return is 0.30.What would be the price of a put option on the same stock with an exercise price of $140 and the same time (3 months) until expiration? Show all workings. (Use the Cumulative Normal Distribution Table) *Show manual workings. No Excel. You can type calculator inputs and outputs.
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.
The current stock price of IBM is $64. A put option on IBM with an exercise price of $67 sells for $7 and expires in 1 month(s). If the risk-free rate is 1.1% per year, what is the price of a call option on IBM with the same exercise price and expiration date (keep two decimal places)?

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