. Using the following information, calculate the price of a 12-month short call option using a two-step binomial tree procedure. So = £15, K = £16, r = 5% (annual), o = 30% (annual). You are given the following equations: p= u-d (1) a = erat (2) f = [pfu+ (1-p)fale-rat (5) = eo√At (3) d == (4)

. Using the following information, calculate the price of a 12-month short call option using a two-step binomial tree procedure. So = £15, K = £16, r = 5% (annual), o = 30% (annual). You are given the following equations: p= u-d (1) a = erat (2) f = [pfu+ (1-p)fale-rat (5) = eo√At (3) d == (4)

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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Suppose you make a charge of $1000 to a new credit card, but then charge nothing else and make the minimum payment each month. If the finance charges amount to a monthly rate of 1% and the minimum payment is 7% of the new balance, then your balance B, in dollars, after n payments is an exponential function given by the following formula. B = 1000 x a" Here the decay factor a is obtained from the finance charge and the minimum payment as shown in the following formula. a = (1 + 0.01)(1 – 0.07) (a) Find the exact value of the decay factor a. (Round your answer to three decimal places.) (b) By what percentage does your balance decrease each month? (Round your answer to one decimal place.) % (c) What will your balance be after you have made payments for 2 years? (Round your answer to two decimal places.) $ Need Help? Read It
Assume the following: LC Exposure = 10,000; Spot Rate = $1.00/LC1.00; 1 Year Forward = $0.98/LC1.00; 1 Year Strike Price = $0.975; Premium = $0.005; and WACC = 8.0% p.a. Please calculate the cost of the forward contract and the option.
The below table shows the list of prices for puts expiring in 30 days (T = 1/12). Using the put option with a strike price of $234, estimate the level of the VIX index. K 230 2.14 231 2.37 232 2.62 233 2.91 234 3.23 235 3.60 236 4.01 237 4.47 238 4.95 Other parameters you'll need: sO = $234.35 r = 0.74% T = 1/12 years (required precision 0.01 +/- 0.01)
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A put currently has a strike price of $54 and a maturity of six months. what will be the profit/loss in each scenario to an investor who buys the put for $6.40? (a)$44 (b)$49 (c)$54 (d)$59 (e)$64
Price a 3 month call using a one step binomial tree where the risk free rate is 1.00%. Where S0 is $50, the strike price is 52 and it can increase or decrease by 10% with equal probability.
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Please show step by step how to solve this AMT is currently trading at $110/share. You bought 4 CALL-option contracts on AMT with a strike price of $100 for $26.0 each and sold 4 CALL - option contracts on AMT with a strike price of $130 for $7.0 each. a. What will be your total $ and % gain/loss if AMT price is $115 at the expiration date?b. What will be your total $ and % gain/loss if AMT price is $135 at the expiration date?c. What will be your total $ and % gain/loss if AMT price is $100 at the expiration date?

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