A stock is trading at 211.35 and will pay a dividend of 3.45 in two months. Two- and three- month zero-coupon bonds are trading at 0.9837 and 0.9753 per dollar of face, respectively. Three-month European puts struck on the stock at 216 are trading at 20.2. What's the price of a three-month ATM European call on the stock also struck at 216?
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- VijayStock of HLL is currently trading in the market at Rs.220. The price of the stock is expected to go up or down by 15% in the first half year and by 5% in the second half year. The return on the Government security being traded in the market for same maturity is 4% p.a. You are required to calculate the value of a one-year American put option on HLL’s stock with strike price of Rs.2501) Assume that the risk-free rate is 7% per annum (continuous compounding) for all maturities. Compute the three-month forward prices of the following assets: i) A share that will distribute a $8 dividend in 2 months and a $12 dividend in six months. The current spot price of the share is $85. ii) The Swiss franc. The current spot price is 1.4 dollars for 1 Swiss franc and the foreign (i.e., the Swiss) risk-free rate is 6% per annum (continuous compounding).
- A 6-month European call option on a dividend-paying stock is cur- rently selling for $1.75. The stock price is $58.56, the strike price is $55, and a dividend of $1.20 is expected in 2 months and 5 months. The risk-free interest rate is 3% per annum for all maturities. (a) What opportunities are there for an arbitrageur? Detail your answer. (b) In this market a European put option with same strike price and maturity is also available for trading. Derive the no-arbitrage $3. price of the put option if the call option has a price of c = %3D (c) The European put option in the above section is trading at $3. What opportunities are there for an arbitrageur? Detail your answer.What is the lower bound for the price of a 7-month European call option on a dividend-paying stock when the stock price is $38.3, the strike price is $40, the risk-free interest rate is 1.1% per annum, and the stock is expected to pay a dividend of $2.56 in three months? Report your answer in dollars and cents.Consider a European call on a stock when there are ex-dividend dates in 5. four months and seven months. The dividend on each ex-dividend date is expected to be $2.50. The current stock price is $50, the exercise price is $51, the volatility is 20% per annum, the continuously compounded risk- free interest rate is 12% per annum, and the time to expiration is nine months. Calculate the price of the call.
- Consider the following two financial assets:(i) an ordinary share that is expected to pay a dividend of £2 next year with dividendgrowth expected to be 4% per annum thereafter;(ii) a corporate bond with an annual coupon rate of 7%, par (face) value of £1000,and maturity of 5 years. If the required return on similar UK equities is 10% and on similar UK bonds is 6%,calculate the value of the UK stock and the UK bond.BUG's stock price S is $50 today. It pays a dividend of $0.25 after two months and $0.30 after five months. The continuously compounded interest rate is 1.22 percent per year. If the four- month forward price is $51.49, the arbitrage profit that you can make today by trading one forward contract and other securities is: [round to two decimal places]The stock market index is trading at 600. Consider a two-stage binomial tree with the length of each stage equal to one month. The volatility of the index is 39.25% and the continuously compounded interest rate is 12% per annum. There is no dividend yield. Calculate the price of a 2-month American put on the index with strike 610.
- The prices of European call and put options on a non-dividend-paying stock with 12 months to maturity, a strike price of $120, and an expiration date in 12 months are $20 and $5, respectively. The current stock price is $130. What is the implied risk-free rate? 8.62 % 9.05 % 5.85 % 4.26 %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. =There is a European put option on a stock that expires in two months. The stock price is $76 and the standard deviation of the stock returns is 58 percent. The option has a strike price of $84 and the risk-free interest rate is an annual percentage rate of 4.8 percent. What is the price of the put option today? Use a two-state model with one- month steps. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Put value