4) A stock is currently trading at $45. A call option has strike price $44, o=23%, and maturity of 6 months. Interest rates are 3% per year. 4a) What is the probability that the option will end up "in-the-money"? 4b) What is the delta of the option? 4c) What is the price of the option?

4) A stock is currently trading at $45. A call option has strike price $44, o=23%, and maturity of 6 months. Interest rates are 3% per year. 4a) What is the probability that the option will end up "in-the-money"? 4b) What is the delta of the option? 4c) What is the price of the option?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4MC

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

Question

4) A stock is currently trading at $45. A call option has strike price $44,
0=23%, and maturity of 6 months. Interest rates are 3% per year.
4a) What is the probability that the option will end up "in-the-money"?
4b) What is the delta of the option?
4c) What is the price of the option?

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