. Now assume that the effective annual interest rate is 6.70%, which corresponds to a monthly interest rate of 0.54%. Calculate the present value of each call option's exercise price and the adjusted intrinsic value for each call option. (Do not round your intermediat calculations and round your final answers to 2 decimal places.) Company RJay RJay Sell-Mart Xenon Time to Expiration (months) 1 2 5 6 $ Strike 60 70 60 7.50 $ So 62.92 62.84 69.80 6.78 PV(X) Adjusted Intrinsic Value

. Now assume that the effective annual interest rate is 6.70%, which corresponds to a monthly interest rate of 0.54%. Calculate the present value of each call option's exercise price and the adjusted intrinsic value for each call option. (Do not round your intermediat calculations and round your final answers to 2 decimal places.) Company RJay RJay Sell-Mart Xenon Time to Expiration (months) 1 2 5 6 $ Strike 60 70 60 7.50 $ So 62.92 62.84 69.80 6.78 PV(X) Adjusted Intrinsic Value

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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For the following problem assume the effective 6-month interest rate is 2 %, the S&T 6-month forward price is $ 1020, and use the premiums listed below for S&T options with 6 month to expiration. Strike Call Put 950 120.405 51.777 1000 93.809 74.201 1020 84.47 84.47 1050 71.802 101.214 1107 51.873 137.167 Suppose you buy the S&T index for $ 1000 and buy a 950-strike put, and sell a 1107-strike call. Determine the profit for this position at the following S&T index spot prices at expiriry. When price is $ 925, the profit is $ When price is $ 950, the profit is $ When price is $ 975, the profit is $ ? When price is $ 1000, the profit is $ ? When price is $ 1025, the profit is $ ? When price is $ 1050, the profit is $ ? When price is $ 1075, the profit is $ ? When price is $ 1100, the profit is $ ? When price is $ 1125, the profit is $ ?
For the following problem assume the effective 6-month interest rate is 2 %, the S-T 6-month forward price is $ 1020, and use the premiums listed below for S-T options with 6 month to expiration. Strike Call Put 950 120.405 51.777 1000 93.809 74.201 1020 84.47 1050 71.802 101.214 84.47 1107 51.873 137.167 1) Suppose you buy the S-T index for $ 1000 and buy a 950-strike put. Determine the profit for the following S-T index spot prices at expiry. When price is $ 925, the profit is $ ? When price is $ 950, the profit is $ When price is $ 975, the profit is $ When price is $ 1000, the profit is $ ? When price is $ 1025, the profit is $ ? When price is $ 1050, the profit is $ ? When price is $ 1075, the profit is $ ? When price is $ 1100, the profit is $ ? When price is $ 1125, the profit is $ ? 2) Suppose you buy a 950-strike call and invest $ 931.37 in zero-coupon bonds. Determine the profit for the following S-T index spot prices at expiry. When price is $ 925, the profit is $ When price…
Finance Assuming we have the following immediate interest rates in the market: 1M - 2.5%, 2M - 2.8%, 3M - 3%, calculate the FRA 1v2 rate. Assume that each month has 30 days and a year has 360 days. If the investor has purchased this contract at the FRA rate calculated above and the interest rate in the market at the time the contract is settled is 3.2%, then in which direction the settlement flows (between the buyer and seller of the contract)? (please use the formula to solve it, thank you)
Please use the following information to answer You have account paybles: ₤5 m in one year.InterestUS: 6.10% per annum & InterestUK: 9% per annumSpot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity)Call option strike price: $1.46/£ & Put option premium: $0.02/£How much will you receive in $ if you use the forward contract hedge? You must show all work to earn credit. No credit will be given without supporting work. 5,000,000 GBP x $1.46 = $7,300,000 $7,300,000 x 6.10% x 1 year = $445,300 $7,300,000 + $445,300 = $7.7453 million 2. Draw a graph for the forward contract hedge. (X axis is the spot rate in the future. Y axis is “$ cash paid.”)
Suppose you work as a broker in an investment company, and there is an expectation that the market interest rate will be 0.029. based on this expectation you are required to calculate the market price for the following CD;Issue date: 1 January 2021 Maturity date:10 May 2021. The face value OMR 10000. Interest on CD: 5 percent. Select one: a. 15942.02 b. 15574.10 c. 15677.97 d. All the given choices are not correct e. 15572.50
For the following problems assume the effective 6-month interest rate is 2%, the S&R 6-month forward price is $1020, and use these premiums for S&R options with 6 months to expiration: Strike Call $950 $120.405 $51.777 1000 93.809 1020 84.470 1050 71.802 1107 51.873 Tuercice Put verly 74.201 84.470 101.214 137.167 T--- Q4 (Exercise 3.14) Suppose you buy a 950-strike S&R call, sell a 1000-strike S&R call, sell a 950-strike S&R put, and buy a 1000-strike S&R put. (a) Verify that there is no S&R price risk in this transaction. (b) What is the initial cost of the position? (c) What is the value of the position after 6 months? (d) Verify that the implicit interest rate in these cash flows is 2% over 6 months.
Vijay
Which one of the following offers provides the highest return? Investment Option APR (Annual Percentage Rate) D A B C D 17.50% 18.00% 18.50% 17.00% A C You are indifferent among the options. C and D B Frequency of interest payment (in a year) 12 2 1 48
Suppose you work as a broker in an investment company, and there is an expectation that the market interest rate will be 0.031. based on this expectation you are required to calculate the market price for the following CD; Issue date: 1 January 2021 Maturity date:10 May 2021. The face value OMR 10000. Interest on CD: 5 percent.
You have account receivables: ₤5 m in one year. o InterestUS: 6.10% per annum & InterestUK: 9% per annum o Spot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity) o Put option strike price: $1.46/£ & Put option premium: $0.02/£ How much will you receive in $ if you use the money market hedge?
Suppose the term structure of interest rates is shown below: Term Rate (EAR%) 5.00% 4.80% O $2,408 1 year 2 years 3 years 5 years 10 years 20 years The present value (PV) of receiving $1,100 per year with certainty at the end of the next three years is closest to O $3,612 O $4,214 O $3,010 4.60% 4.50% 4.25% 4.15%
following questions: a. What is the mid-rate for each maturity? b. What is the annual forward premium for all maturities? (Click on the icon to import the table into a spreadsheet.) Period spot 1 month 2 months 3 months 6 months 12 months 24 months Period Bid Rate Spot 1.3267 1.3265 1.3263 1.3259 1.3250 1.3228 1.3179 a. What is the mid-rate for each maturity? Calculate the mid-rate for each maturity below: (Round to five decimal places.) Days Forward Ask Rate 0 1.3268 1.3266 1.3264 1.3262 1.3252 1.3233 1.3207 Bid Rate US$/€ 1.3267 Ask Rate US$/€ 1.3268 Mid-rate US$/€

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