A stock is currently trading at $63.00. In one period, it will either be worth $73.00 or $53.00. No other prices for the stock are possible. A risk free asset worth $1 currently will be worth $1.023 in one period. What is the price of a European CALL option that expires in one period with a strike price of $66.00? Report your answer without a dollar sign to 4 decimal places.

A stock is currently trading at $63.00. In one period, it will either be worth $73.00 or $53.00. No other prices for the stock are possible. A risk free asset worth $1 currently will be worth $1.023 in one period. What is the price of a European CALL option that expires in one period with a strike price of $66.00? Report your answer without a dollar sign to 4 decimal places.

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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am. 116.
Suppose the 6-month Mini S&P 500 futures price is 1,345.99, while the cash price is 1,335.81. What is the implied difference between the risk-free interest rate and the dividend yield on the S&P 500? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Implied difference %
The price of a stock, which pays no dividends, is $30 and the strike price of a two-year European call option on the stock is $25. The risk-free rate is 8% (continuously compounded). Which of the following is a precise lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound? Round your answer to 2 decimal places. a. $8.42 b. $8.76 c. $8.57 d. $8.70
Please answer question 4-c
The spot price of a share of XYZ stock is $100. The annual risk-free continuously compounded interest rate is 0.07, and the stock pays no dividends. The annualized standard deviation of the continuously compounded stock return is 0.2. Find the price of a European call option on the stock with strike price $110 and that matures in 4 years.
Please answer question 4-a
Suppose the quoted futures price for delivery in 1 year is $7.10. The current underlying price is $7 and the continuously compounded interest rate is 5%. The underlying does not pay dividends. How could you make a riskless arbitrage profit? Question 2Answer a. buy futures contracts, short sell the stock and invest in a bank account b. borrow from the bank to buy futures contracts and short sell the stock c. sell futures contracts, borrow and buy the stock d. sell future contacts, short sell the stock and invest in a bank account
A share is currently priced at £50. After one time period the share price will either increase to £70 or decrease to £40. Assume the interest rate is 4% per time period. Find the no-arbitrage price of a European derivative on the share which has payoff £90 if the share price goes up and £110 if the share price goes down. State your answer to the nearest pence. Do not enter the pound sign.
(a) The table below gives information about European options with a maturity date of 6 months. Type Of option Strike Price Call 65 Call 58 Put 65 Premium 5 8 4 (i) Devise the payoff profile of the hedging strategy from the above for an investor betting on an increase in the stock price and calculate the payoff if the stock price increases to $66 after 6 months. (8 marks) (ii) Suppose that another investor expects a big stock price movement but is not sure of the direction. She however bets that the downward movement is more likely. Devise the corresponding trading strategy and calculate the payoff if the stock price is $55 after 6 months. (8 marks) (b) By analysing the pay off profiles of a protective put strategy and a straddle, discuss in what ways these strategies shield the investor from potential losses.
What is the value of a put option if the underlying stock price is $47, the strike price is $40, the underlying stock volatility is 52 percent, and the risk-free rate is 5.5 percent? Assume the option has 150 days to expiration. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) X Answer is complete but not entirely correct. Value of a put option $ 7.00
A non-dividend paying asset is current priced at $25 and the risk-free interest rate is 8% per annum. Today, you enter into a six-month futures contract to buy a unit of this asset. Three months from now the underlying price has fallen to $18 (but note that the interest rate has not moved). Which of the answers below is closest to the fall in the futures price? Use discrete discounting. Question 7Answer a. $6.50 b. $5.50 c. $7.50 d. $4.50
Suppose that a stock is currently trading at £ 38, and that the current prices for European call and put options on this stock with maturity T 10 years and identical strike price K are equal to £30 and £35, respectively. Assuming that interest is compounded annually at rate 4%, determine the strike price to the nearest pence. Do not type in the pound sign. =

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