A stock price is currently $23. A butterfly spread (ie. options are bought with strike prices of K₁ and K3, and two options with the middle strike price K₂ are sold) is created from call options with strike prices of $20, $25, and $30. Which of the following is TRUE? Select one alternative: O It is incorrect to assume that there is always a gain when the stock price is greater than $30 or less than $20. O The loss when the stock price is greater than $30 is the same as the loss when the stock price is less than $20. O The gain when the stock price is greater than $30 is greater than the gain when the stock price is less than $20. O The gain when the stock price is greater than $30 is less than the gain when the stock price is less than $20.

A stock price is currently $23. A butterfly spread (ie. options are bought with strike prices of K₁ and K3, and two options with the middle strike price K₂ are sold) is created from call options with strike prices of $20, $25, and $30. Which of the following is TRUE? Select one alternative: O It is incorrect to assume that there is always a gain when the stock price is greater than $30 or less than $20. O The loss when the stock price is greater than $30 is the same as the loss when the stock price is less than $20. O The gain when the stock price is greater than $30 is greater than the gain when the stock price is less than $20. O The gain when the stock price is greater than $30 is less than the gain when the stock price is less than $20.

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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Which of the following statement is most accurate in analyzing a stock? If the security has a lower intrinsicvalue than that of the current price_________________a. The stock is good to buyb. Buy more stocks it will definitely go upc. Buy more stocks when price increasesd. The stock is not good to buye. None of the above.
Explain why an American call options on futures could be optimally exercised early while call options on the spot can not be optimally exercised. Assume that there is no dividend. Explain how to use call options and put options to create a synthetic short position in stock.
If the stock price increases, the price of a put option on that stock ________ and that of a call option _________. decreases, increases decreases, decreases increases, decreases increases, increases
In our study of Real Options, we learned about the many benifits of Real Options. Of the below, which is FALSE? O A. Given the option to delay, an investment that currently has a negative NPV can have a positive value. O B. As the level of uncertainty increases, the benefit of waiting is diminished. OC. In a real option analysis, the dividends correspond to any value from the investment that we give up by waiting. O D. By delaying an investment, we can base our decision on new information.
3 You are given the following information on some company's stock, as well as the risk- free asset. Use it to calculate the price of the call option written on that stock, as well as the price of the put option. (HINT: You should use the Black-Scholes formula!) (Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.) Today's stock - $77 price = Exercise price = $75 Risk-free rate = Option maturity = 5 months Standard deviation of annual stock returns Call price Put price $ $ 3.4% per year, compounded continuously = 59% per year 3.61 x 0.56 X 1
2. Exercise value and option price The value derived from exercising an option immediately is the exercise value. No rational investor would exercise an option that is out-of-the-money, so the minimum exercise value is zero. The following table provides information regarding options on ABC Corp. stock. Because the stock's price is volatile, investors trade options to either hedge their positions or speculate on price movements. Investors can either buy options or "issue" new options, which is called writing options. The following table presents the data on ABC Corp.'s call options at different stock prices. Based on your understanding of exercise value and option prices, complete the table with a strike price of $24.00: Stock Price ($) 16.00 32.00 40.00 44.00 48.00 Strike Price ($) 24.00 24.00 24.00 24.00 24.00 Exercise Value ($) Market Price of Option ($) 1.56 10.10 0.00 20.00 18.40 22.60 28.00 Time Value ($) 2.10 2.40 4.00 After two weeks, the stock price of ABC Corp. increases to…
Ningbo Industrial Concepts Incorporated Initial stock price $115.00 Exercise price $115.00 Call price $4.75 Put Price $4.50 Required: Using the information in the table above, please calculate dollar value of the following option strategies. Use this calculated dollar value to determine the profit of each strategy at various stock prices. (Use cells A3 to B6 from the given information to complete this question. Negative answer should be input and displayed as a negative value. All other answers should be input and displayed as positive values.) Ningbo Industrial Concepts Incorporated Dollar Value of Strategy as a Function of Current Stock Price Strategy $95.00 $105.00 $115.00 $125.00 $135.00 Straddle Strip Strap Ningbo Industrial Concepts Incorporated Rate of Return…
Only typing. .... . A strip is a variation of a straddle involving two puts and one call. Construct a short strip using the August 170 options. The price of the call option is $8.10 and the price of the put option is $6.75. Hold the position until the options expire. Determine the profits and graph the results. Identify the breakeven stock prices at expiration and the minimum profit.
You hold a portfolio of an asset-or-nothing call and a cash-or-nothing put option written on a stock that does not pay dividends. The strike price of the options is the same. The payout of the cash-or- nothing option if it is exercised equals the strike price. Your portfolio is equivalent to O A plain-vanilla call option. O None of the other answers are correct. O A covered call position, i.e., a long stock + short plain vanilla call. O A plain-vanilla put option. O A protective put position, i.e., a long stock + long put option.
A butterfly spread is a position in three options on the same underlying stock with different strikes. An investor buys one call with a strike K1 = 22, sells two calls with a strike K2 = 24 and buys one call with a strike K3 = 26. What is the payoff of the butterfly spread, if the stock price equals $26 at maturity?
The profit (loss) experienced on option B is $ ? (Round to the nearest dollar. Enter a negative number for loss.) The profit (loss) experienced on option C is $ ? (Round to the nearest dollar. Enter a negative number for loss.) The profit (loss) experienced on option D is $ ? (Round to the nearest dollar. Enter a negative number for loss.) The profit (loss) experienced on option E is $ ? (Round to the nearest dollar. Enter a negative number for loss.) How do I find the calculations for these questions?
PLEASE ANSWER CORRECTLY ALL THE FALLOWING ******MAKE SURE YOU DONT NOT GIVE ME THE WRONG ANSWERS

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