A stock has a price of $84 and a volatility of 25% per annum. European options on the stock have a strike price of $80 and a time to maturity of 180 days. The risk free interest rate is 5% per annum on a continuously compounded basis. The stock pays dividends at a continuously compounded rate of 3.0%. Use the BSMOPM. Use this information to answer the next 3 questions. The risk-neutral probability that the put option will be worth exercising on the expiration date is closest to: a. 0.4027 b. 0.5973 c. 0.3372 The value of the European call option is closest to: a. $4.30 b. $6.30 c. $8.30 Which of the following is the correct position in the stock to hedge a position in 200 written puts on the stock? a. Short-sell 66.31 shares of stock b. Short-sell 130.61 shares of stock c. Buy 66.31 shares of stock
A stock has a price of $84 and a volatility of 25% per annum. European options on the stock have a strike price of $80 and a time to maturity of 180 days. The risk free interest rate is 5% per annum on a continuously compounded basis. The stock pays dividends at a continuously compounded rate of 3.0%. Use the BSMOPM. Use this information to answer the next 3 questions. The risk-neutral probability that the put option will be worth exercising on the expiration date is closest to: a. 0.4027 b. 0.5973 c. 0.3372 The value of the European call option is closest to: a. $4.30 b. $6.30 c. $8.30 Which of the following is the correct position in the stock to hedge a position in 200 written puts on the stock? a. Short-sell 66.31 shares of stock b. Short-sell 130.61 shares of stock c. Buy 66.31 shares of stock
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
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Transcribed Image Text:A stock has a price of $84 and a volatility of 25% per annum. European options on the stock have a strike price of $80 and a time to maturity of 180 days. The risk free interest
rate is 5% per annum on a continuously compounded basis. The stock pays dividends at a continuously compounded rate of 3.0%. Use the BSMOPM.
Use this information to answer the next 3 questions.
The risk-neutral probability that the put option will be worth exercising on the expiration date is closest to:
a. 0.4027
b. 0.5973
c. 0.3372
The value of the European call option is closest to:
a. $4.30
b. $6.30
c. $8.30
Which of the following is the correct position in the stock to hedge a position in 200 written puts on the stock?
a. Short-sell 66.31 shares of stock
b. Short-sell 130.61 shares of stock
c. Buy 66.31 shares of stock
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