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?

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?

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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What are the prices of a call option and a put option with the following characteristics? Stock price = $93 Excerise price = $90 Risk - free rate = 4% per year, compounded continuously Maturity = 5 months Standard deviation = 62% per year
The price of a stock is currently $50. Over the course of the next year, the price is anticipated to rise to $55 or decline to $46. If both outcomes are equally likely and the risk free interest rate is 3%, what is the price of a one year call option with an exercise price of $50 using the binomial model? Multiple Choice $2.43 $2.50 $2.66 $2.70
Consider an European put option. Suppose Exercise price=$60. Expiration date=50 (and we assume 360 days of conversion). If risk-free rate is 5%, and the underlying stock price is $100, what is the lower boundary for this European put option?
A power call option pays off (max(ST-X, 0))2 at time T, where ST is the stock price at time T and X is the exercise price. A stock price is currently $25. It is known that at the end of one year it will be either $30 or $20. The risk-free rate of interest with continuous compounding is 7.5% per annum. Calculate the value of a one year power call option with an exercise price of $25. a. What is the delta of the power call option?(sample answer: 0.75) b. What is the risk neutral probability of up movement?(sample answer: 0.75) c. What is the value of the power option?(sample answer: $15.75)
Stock Z is currently selling for $120. You believe that, one year from now, Stock Z will sell for either $155 (up-state) or $85 (down-state). The yield on a 1-year risk-free zero coupon bond is currently 4%. You have a European put option with a 1-year expiration date and an exercise price of $115. What is this option's delta (Δ) ?
A power option pays off [max(S₁ - X),01² at time T where ST is the stock price at time T and X is the strike price. Consider the situation where X = 26 and T is one year. The stock price is currently $24 and at the end of one year it will either $30 or $18. The risk-free interest rate is 5% per annum, compounded continuously. What is the risk- neutral probability of the stock rising to $30? 0.500 0.603 0.450 None of the above
A share of MSFT is currently selling for $54. A put option, with an exercise price of $30, sells for $3. If the options expire in one year and the borrowing rate is 6%, what must be the price of a call option with an exercise price of $30?
You are attempting to value a put option with an exercise price of $102 and one year to expiration. The underlying stock pays no dividends, its current price is $102, and you believe it has a 50% chance of increasing to $121 and a 50% chance of decreasing to $83. The risk-free rate of interest is 10%. Calculate the value of a put option with exercise price $102.
A power call option pays off (max(ST-X, 0))2 at time T, where ST is the stock price at time T and X is the exercise price. A stock price is currently $55. It is known that at the end of one year it will be either $60 or $50. The risk-free rate of interest with continuous compounding is 6% per annum. Calculate the value of a one year power call option with an exercise price of $54. a. What is the delta of the power call option? (sample answer: 1.55 or 0.55) b. What is the risk neutral probability of up movement? (sample answer: 55.50%) c. What is the value of the power option?
The current price of a stock is $34, and the annual risk - free rate is 3 %. A call option with a strike price of $32 and with 1 year until expiration has a current value of $5.54. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent. Please answer fast i give you upvote.
Suppose a one-year European put option on a stock has an exercise price of $30 and oneyear European call option on the same stock has the same exercise price of $30. The call is worth 3$ and the put is worth 2$. If the one-year interest rate is 1.5%, what is the price of the underlying stock, assuming no arbitrage opportunity?
A put option that expires in six months with an exercise price of $65 sells for $4.45. The stock is currently priced at $61, and the risk-free rate is 3.9 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Call price

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