FinanceSuppose that a stock price is currently selling at $170. Over each of the next two 3-month periods it isexpected to go up by 5% or down by 5%. The risk-free interest rate isat at 2.5% each quarter.What is the value of a 6-month European call option with a strike price ofS160? What is the value of a 6-month European put option with a strike price of $170?

Call Option: The call option provides the buyer the right to buy the security by paying a premium.…

Answered: at at 2.5% each quarter.What is the…

at at 2.5% each quarter.What is the value of a 6-month European call option with a strike price of $160? What is the value of a 6-month European put option with a strike price of $170?

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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The price of a European call that expires in six months and has a strike price of $30 is $2. The underlying stock price is $29, and a dividend of $0.50 is expected in two months and again in five months. Risk-free interest rates (all maturities) are 10% per annum with continuous compounding. What is the price of a European put option that expires in six months, and has a strike price of $30 and the same underlying asset?
Please use the following information to answer You have account paybles: ₤5 m in one year.InterestUS: 6.10% per annum & InterestUK: 9% per annumSpot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity)Call option strike price: $1.46/£ & Put option premium: $0.02/£How much will you receive in $ if you use the forward contract hedge? You must show all work to earn credit. No credit will be given without supporting work. 5,000,000 GBP x $1.46 = $7,300,000 $7,300,000 x 6.10% x 1 year = $445,300 $7,300,000 + $445,300 = $7.7453 million 2. Draw a graph for the forward contract hedge. (X axis is the spot rate in the future. Y axis is “$ cash paid.”)
The stock price is currently $100. Over each of the next two six-month periods, it is expected to go up by 20% or down by 20%. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a one-year European call option with a strike price of $100? What is the value of a one-year European put option with a strike price of $100? Verify that the European call and European put prices satisfy put-call parity.
A stock price is currently $71. Over each of the next two 3-month periods it is expected to go up by 8% or down by 8%. The risk - free interest rate is 4% per annum with continuous compounding. What is the value of a 6 month European call option with a strike price of $70? Keep intermediate step numerical values correct to 3 decimal places and calculate your final answer to 2 decimal places.
Please give me answer very fast in 5 min sau
Consider a European call option on DELL that has an exercise price of $100 and four months (14%) until expiration. The annual risk-free rate of interest is 0.07%, compounded continuously. DELL call option and stock are priced at $5.79 and $97.80 per share, respectively, today. (a) Compute today’s value of a European put option on DELL that has the same exercise price and expiration date as the above call option on DELL. Show numerically which option has a higher time value of option. (b) Compute the profit to the writer of the in/at/out of (circle one) money put option if DELL stock is priced at $95.0 when the option expires. (c) Suppose that DELL has 10 million shares of common stock outstanding, and issues one million warrants that each can be exchanged for 2 shares of common stock. The warrant has the same exercise price and expiration date as the above call option on DELL. (i) Compute the value of each warrant that is in/at/out of (circle one) money. (ii) If you currently own 1,000…
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The stock price is currently $130. Over each of the next two 2-month periods, it is expected to go up by 3% or down by 4%. The risk - free interest rate is 1.5% per annum with continuous compounding. What is the value of a 4- month European put option with a strike price of $120? Use a binomial tree model, and round the result to three decimal places. 1. $1.019 2. $2.602 3. S 0.029 4. $0.0 5. $6.645
A share of MSFT is currently selling for $54. A put option, with an exercise price of $30, sells for $3. If the options expire in one year and the borrowing rate is 6%, what must be the price of a call option with an exercise price of $30?
A European put option on a barrel of crude oil with a strike price of $50 and a maturity of one-month, trades for $3.0. What is the price of the call premium with identical strike price and time until expiration, if the one-month risk-free rate is 2% and the spot price of the underlying asset is $52? NAME TYPE STRIKE PRICE PRICE AT EXPIRATION DATE A PUT 100 115 B CALL 100 95 C PUT 80 70 D CALL 80 95 A. Which of the following options are in the money? B. Which of the following options are out of the money? C. What is the intrinsic value of the C option? D. What is the upper bound and lower bound of the B option above?
A futures price is currently 65, its volatility is 22% per annum, and the risk-free interest rate is 5.5% per annum. What is the value of a five-month European put on the futures with a strike price of 60?
Suppose the September Eurodollar futures contract has a price of 96.4. You plan to borrow $50m for 3 months in September at LIBOR, and you intend to use the Eurodollar contract to hedge your borrowing rate. a. What rate can you secure? b. Will you be long or short the Eurodollar contract? c. How many contracts will you enter into? d. Assuming the true 3-month LIBOR is 1% in September, what is the settlement in dollars at expiration of the futures contract? (For purposes of this question, ignore daily marking-to-market on the futures contract.)

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