A stock trades for $45 per share. A call option on that stock has a strike price of $54 and an expiration date six months in the future. When the volatility of the stock's returns is 30%, the Black and Scholes value of the option is $3.82. Now assume, the volatility of the stock's returns is 47%, and the risk-free rate is 6%. Intuitively, would you expect this to cause the call price to rise or fall? By how much does the call price change? + Intuitively, would you expect this to cause the call price to rise or fall? (Select the best answer below.) OA. The call price will not change with the volatility of the stock's returns. GB The call price will fall with the volatility of the stock's returns. C. The call price will rise with the volatility of the stock's returns. The Black and Scholes value of this call option is $ (Round to the nearest cent.)

A stock trades for $45 per share. A call option on that stock has a strike price of $54 and an expiration date six months in the future. When the volatility of the stock's returns is 30%, the Black and Scholes value of the option is $3.82. Now assume, the volatility of the stock's returns is 47%, and the risk-free rate is 6%. Intuitively, would you expect this to cause the call price to rise or fall? By how much does the call price change? + Intuitively, would you expect this to cause the call price to rise or fall? (Select the best answer below.) OA. The call price will not change with the volatility of the stock's returns. GB The call price will fall with the volatility of the stock's returns. C. The call price will rise with the volatility of the stock's returns. The Black and Scholes value of this call option is $ (Round to the nearest cent.)

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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A stock trades for $45 per share. A call option on that stock has a strike price of $55 and an expiration date twelve months in the future. The volatility of the stock's returns is 44%, and the risk-free rate is 5%. What is the Black and Scholes value of this option? The Black and Scholes value of this call option is $ (Round to the nearest cent.)
Suppose that a stock price is currently 49 dollars, and it is known that one month from now, the price will be either 8 percent higher or 8 percent lower. Find the value of an American call option on the stock that expires one month from now, and has a strike price of 51 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 7 percent.
A stock sells for $125. A call option on the stock has an exercise price of $110 and expires in 3 months. If the interest rate is 0.15 and the standard deviation of the stock’s return is 0.30. What would be the price of a put option on the same stock with an exercise price of $140 and the same time (3 months) until expiration? Show all workings. (See Appendix for the Cumulative Normal Distribution Table) b) Let the spot rate be Yen 100 / $ and the 3-month forward rate be Yen 99/$. Compute the interest rate differential between the U.S. and Japan at which interest rate parity will hold true.
You buy a share of stock, write a 1-year call option with X = $85, and buy a 1-year put option with X = $85. Your net outlay to establish the entire portfolio is $83.3. Required: What is the payoff of your portfolio? What must be the risk-free interest rate? The stock pays no dividends. Note: Round your answer to 2 decimal places.
You buy a share of stock, write a 1-year call option with X= $85, and buy a 1-year put option with X- $85. Your net outlay to establish the entire portfolio is $83.3. The stock pays no dividends. a. What is the payoff of your portfolio? Payoff b. What must be the risk-free interest rate? (Round your answer to 2 decimal places.) Risk-free rate %
A stock is currently priced at $61 and has an annual standard deviation of 41 percent. The dividend yield of the stock is 2.8 percent, and the risk-free rate is 4.8 percent. What is the value of a call option on the stock with a strike price of $58 and 52 days to expiration? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Call option $
A stock trades for $46 per share. A call option on that stock has a strike price of $53 and an expiration date six months in the future. The volatility of the stock's returns is 45%, and the risk-free rate is 3%. What is the Black and Scholes value of this option? The Black and Scholes value of this call option is (Round to the nearest cent.)
You are holding call options on a stock. The stock’s beta is 0.86, and you are concerned that the stock market is about to fall. The stock is currently selling for $22 and you hold 1 million options (i.e., you hold 10,000 contracts for 100 shares each). The option delta is 0.95. How much of the market-index portfolio must you buy or sell to hedge your market exposure? Note: Enter your answer in dollar not in millions. please answer fast i give upvote
Find the implied volatility (to 2 decimals, for example, �=8.23% ) of a Put option with a time to expiration of 11 months and a price of $6.13 The stock is currently trading at $47. The riskless rate is 2% per annum, and the strike/exercise price of the option is $50. Hint: compute the Put price using the same formula as in exercise 4 , as a function of the volatility �. Then use Solver to change the volatility cell in order to obtain a price of $6.13 \table[[�1=,-0.0614997,,So =,47],[�2=,,4,�=,50],[,,,�=,2%
A stock is currently selling for $39. In one period, the stock will move up by a factor of 1.29 or down by a factor of .53. A call option with a strike price of $50 is available. If the risk-free rate of interest is 2.5 percent for this period, what is the value of the call option?

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