1. ABC Corp has a stock price of $100 and a one-year Option with a strike price of $105. Assuming an upper stock price of $130 and a lower stock price of $80, and an interest rate of 5%. a. What is the premium, A, and B for a call? b. What is the premium, A, and B for a put? 2. The Widget Company has a stock price of $100 and a one-year option with a strike price of $95. Assuming an upper stock price of $130 and a lower stock price of $80, and an interest rate of 8%. Yerifr that the price of the call is S18 148

1. ABC Corp has a stock price of $100 and a one-year Option with a strike price of $105. Assuming an upper stock price of $130 and a lower stock price of $80, and an interest rate of 5%. a. What is the premium, A, and B for a call? b. What is the premium, A, and B for a put? 2. The Widget Company has a stock price of $100 and a one-year option with a strike price of $95. Assuming an upper stock price of $130 and a lower stock price of $80, and an interest rate of 8%. Yerifr that the price of the call is S18 148

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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One share of Napier Inc. is currently trading at $84 per share. In one year, the price is expected either (1) rise to $105 or (2) fall to $60. You are interested in purchasing a call option on Napier, Inc. The option has a strike price of $92 and expires in 1 year. The current risk-free rate for the year is 4%. Based on binomial options pricing (as shown in class), what is a fair price for this option? Answer to the nearest cent, with no punctuation. That is, $5.289 should be entered at 5.29.
5. Gvalt stock is currently selling for $40 and a 4 month call on Gvalt with an exercise price of $35 is selling $9. a) If you write the call, what is your maximum potential profit? b) Under what condition would this profit be obtained? c) What will be your loss if you wrote the option and the stock was selling for $62 on the date of expiration?
$80. The call premium is $6 and the put premium is $8. To keep thìngs simple, you can assume each contract allows the holder to buy or sell 13) You buy one call contract and also buy one put contract, both with the strike price of one (rather than the typical 100) share of the underlying stock. a. Compute the payoff to your option position if the stock price is $92 when the options expire. b. Compute the profit you made if the stock price is $92 when the options еxpire. c. What would happen to the value of your position if the volatility of returns for the underlying stock increases a day after you bought the call and the put? Please explain your answer for full credit. E FC MacBook Pro I A !!!
IBM stock is currently trading at $100 per share. An investor purchases one Put option contra on IBM with a $100 strike and at a price of $3.00 per contract. Each options contract represer an interest in 100 underlying shares of stock. For each of the following scenarios determine i 7. the option is in the money, at the money, or out of the money. Show your work. A. When the option expires, IBM is trading at $98 B. When the option expires, IBM is trading at $90 C. When the option expires, IBM is trading at $97
You buy a share of stock, write a 1-year call option with X = $85, and buy a 1-year put option with X = $85. Your net outlay to establish the entire portfolio is $83.3. Required: What is the payoff of your portfolio? What must be the risk-free interest rate? The stock pays no dividends. Note: Round your answer to 2 decimal places.
Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, SO, is $50, and a call option expiring in one year has an exercise price, X, of $50 and is selling at a price, C, of $9. With $18, 900 to invest, you are considering three alternatives. a. Invest all $18, 900 in the stock, buying 378 shares. b. Invest all $18,900 in 2, 100 options (21 contracts). c. Buy 100 options (one contract) for $900, and invest the remaining $18,000 in a money market fund paying 6% in interest over 6 months (12% per year). What is your rate of return for each alternative for the following four stock prices in 6 months? (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round the "Percentage return of your portfolio (Bills + 100 options)" answers to 2 decimal places.) The total value of your portfolio in six months for each of the following stock prices is: The percentage…
1.) The option is currently a.) In-the-money b.) At-the-money c.) Out-the-money 2.) In/At/Out- the money by _____ pesos. 3.) What is the Intrinsic Value
The common stock of Triangular File Company is selling at $91. A 13-week call option written on Triangular File's stock is selling for $9. The call's exercise price is $101. The risk-free interest rate is 8% per year. a. Suppose that puts on Triangular stock are not traded, but you want to buy one. Which combination will produce the same results? Buy call, invest PV(EX), sell stock short Sell call, invest PV(EX), sell stock short Buy call, lend PV(EX), buy stock Sell call, lend PV(EX), buy stock b. Suppose that puts are traded. What should a 13-week put with an exercise price of $101 sell for? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Put option price
Give typing answer with explanation and conclusion The XYZ Corporation stock currently sells for $52/share. The premium for a put option expiring in four weeks is $2.07. Suppose you buy 5 contracts of this put option. What is your maximum gain? (Hint: One option is called a contract, and each contract represents 100 shares of the underlying stock. Exchanges quote options prices in terms of the per-share price, not the total price an investor pays to own the contract.) A) $22,715 B) $26,000 C) $24,965 D) $23,750
2. Why is writing a naked-cal option very risky? (find out first what a naked cal-is): 3. Graph the profits and losses associated with writing a-call option on a security with a strike price of $60-and a premium of $5. 4. Suppose that you own 100 -shares of the-company in which you just wrote the option in previous question: If you puehased these shares at $50 what will your net profit/loss position look like now over, say share prices from $40 to $80? Gonstruct a table-and graph the situation:
The price of Chive Corp. stock will be either $67 or $91 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 4 percent. a. Suppose the current price of the company's stock is $75. What is the value of the call option if the exercise price is $65 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose the current price of the company's stock is $75. What is the value of the call option if the exercise price is $80 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Call value b. Call value
Suppose you have an option to buy a share of ABC Corp stock for $100. The option expires tomorrow, and the current price of ABC Corp is $95. How much is your option worth?

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