9. The stock price of ABC Corporation is currently $220. Over the next year, the stock price will increase by 15% or decrease by 10%. The interest rate at-which investors invest in riskless assets is 4%. Using the binomial option pricing model, the value of a call option with an exercise price of $230 and an expiration date 1 year from now should be worth today. A. $10.56 B. $9.61 C. $11.03 D. $12.38

9. The stock price of ABC Corporation is currently $220. Over the next year, the stock price will increase by 15% or decrease by 10%. The interest rate at-which investors invest in riskless assets is 4%. Using the binomial option pricing model, the value of a call option with an exercise price of $230 and an expiration date 1 year from now should be worth today. A. $10.56 B. $9.61 C. $11.03 D. $12.38

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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The stock price of Copious Corp. is currently $30. The stock price 1 year(s) from now will be either $34 or $27. The annual risk-free rate is 1.4%. Using the binomial model, what is the value of a call option with an exercise price of $30 and an expiration date 1 year(s) from now?
The stock price of Bravo Corp. is currently $140. The stock price a year from now will be either $240 or $100 with equal probabilities. The interest rate at which investors invest in riskless assets is 6%. Using the binomial OPM, the value of a put option with an exercise price of $175 and an expiration date 1 year from now should be worth __________ today. [don't give chagpt answer]
Consider the following information on AAPL. The current stock price is $326.72. The call option has a strike price of $320. The price of the call option is $68. The option has 1 year till expiration. Question: Suppose you purchase the option at the current price and hold it until expiration. If the stock price at expiration is $350, the return on your investment is: -55.88% 44.11% -100% None of the above
The current stock price of KLMCO iNC is $111.00. You expect the stock price a year from now to be either $128.00 or $92.00 with equal probabilities . The interest rate at which investors can borrow is 11%. using the binomial opm, what should be the price of a put option with an exercise price of $120.00 an expiration date one year from now
The current stock price of Chocho inc is $125. You expect the stock price a year from now to be either $134 or $86 with equal probabilities. The interest rate at which investors can borrow is 13%. Using the binomial opm, what should be the price (premium) of a call option with an exercise price of $115.00 and an expiration date one year from now?
4. Consider a call option on the S&R index with 6 months to expiration and a strike price of $1000. Suppose that the effective rate compounded semiannually is 2% and the premium for this call is $93.81. (a) Draw the payoff and profit graphs for the call option holder. (b) If the S&R index price at expiration is $1100, will the owner exercise this option? What is the profit? (c) If the S&R index price at expiration is $900, will the owner exercise this option? What is the profit?
Nn.198. Subject :- Finance
3. Consider a non-dividend paying stock whose initial stock price is 62 and has a log- volatility of σ = 0.20. The interest rate r = 10%, compounded monthly. Consider a 5-month option with a strike price of 60 in which after exactly 3 months the purchaser may declare this option a (European) call or put option. Assume u = 1.05943 and d = = 0.94390 (a) Compute the values of the binomial lattice for 5 1 month period. 0 1 2 3 4 5 62 (b) Compute the appropriate risk-free rate. (c) Find the risk-neutral probability p of going up? (d) Find the values of call option and put option along this lattice: 0 5.85 1 2 3 4 5 call option 0 1 2 3 4 5 1.40 put option
Subject:- finance
Suppose ABC's stock price is currently $25. In the next six months it will either fall to $15 or rise to $40. What is the current value of a six-month call option with an exercise price of $20? The six-month risk-free interest rate is 5% (periodic rate). [Use the riskneutral valuation method]A. $20.00 B. $8.57 C. $9.52 D. $13.10
1) In a one-period binomial model, assume that the current stock price is $100, and that it will rise to $130 or fall to $70 after one month. The gross one month risk - free rate is 1.02 %. Using risk neutral pricing, what is the price of a 100- strike one-month call option? Round your calculaton for q and 1 - q to four (4) decimal places. a. $14.90 b. $14.71 c. $15.05 d. $15.69 2) In a one-period binomial model, assume that the current stock price is $100, and that it will rise to $120 or fall to $80 after one month. The gross one month risk - free rate is 1.03%. Using risk neutral pricing, what is the price of a 100-strike one-month put option? Round your calculaton for q and 1 - q to three (3) decimal places a. $8.00 b. $8.25 c. $8.50 d. $8.75
V4. Using a two-step binomial tree, calculate the value of an American call option where the underlying stock pays a dividend of $1 per share just before the option’s expiration. The stock is trading at $22, the strike is $20, the risk-free rate is 4%. The option is outstanding for another two years (each step in the binomial tree is one year long). The stock is expected to rise or fall 10% in each one-year period prior to expiry. Can you please explain/show in Excel including formulas.

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