Based on the table, compute the 1. value of the call option 2. value of the put option. Contract size (in number of shares) Current market value of an ABC Inc. share Exercise price for an ABC Inc. share Time to expiration in days Volatility Risk-free rate Days in a year 10,000 78.25 76.50 90.00 36% 6% 360

Based on the table, compute the 1. value of the call option 2. value of the put option. Contract size (in number of shares) Current market value of an ABC Inc. share Exercise price for an ABC Inc. share Time to expiration in days Volatility Risk-free rate Days in a year 10,000 78.25 76.50 90.00 36% 6% 360

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 trader has established a short straddle on shares of ABC ltd at sh 5 each for a put option and a call option and a strike price of sh 50. Required: Compute the profits on expiration if the shares are selling at sh 20 sh 40 sh50 sh60 sh 70
Please use the Black-Scholes formula
You enter into a 9-month forward contract on a non-dividend paying stock when the stock price is £38 and the risk-free interest rate is 10% per annum (assume discrete compounding). Which of the below is closest to the no-arbitrage forward price? a. $40 b. $39 c. $41 d. $38
The stock price of Top Gloves Bhd today is RM3.00. The call option on this stock with a strike price of RM2.00 and a 60 days maturity has an option premium of RM1.50. The put option with a strike price of RM2.00 and 60 days expiry possess a premium of RM1.20. The risk-free rate per annum is 5%. Required: (a) Prove that there is mispricing. (b) Suggest a suitable arbitrage strategy for this mispricing.
Question : Current share price is $1.50 Call option exercise price is $1.80 in 3 months Risk free interest rate is 10% p.a. Standard deviation of rate of return on share is 40% Mary owns 1,000 shares. Devise a delta hedge to protect against changes in the share price.
Projections for a firm whose stock you wish to value: Years 1-6 EPS Payout Ratio Stock's beta is YTM on T-bond is Stock premium is 1.26 0.27 1. What is the stock's value? A Between 15.00 and 23.00 B Between 23.00 and 27.00 C Between 27.00 and 31.00 D Between 31.00 and 40.00 0.6 4.3% 5.0% Years 7-13 4.97 0.36 Discount the projected dividends at the required rate of return to estimate the stock's value. Only use years 1-24 in your computations. Years 14 - 24 6.91 0.42 2. Please go back to the original story. Suppose the stock becomes less risky from an investor's view. For instance, suppose its beta is now 0.80 If there are 90,000,000 shares outstanding, what is the impact on the market value of the firm? Hint: first find the new stock price, then compute how it changed, and multiply that change by the number of shares outstanding. A up between 0 and 160,000,000 B up between 160,000,000 and 500,000,000 C down between 0 and 160,000,000 D down between 160,000,000 and 500,000,000
Contract size (in number of shares) 100,000 Market value of an ABC Inc. share 32 Exercise price for an ABC Inc. share 29 Time to expiration (in years) 0.25 Volatility 40% Risk-free rate 5% Based on the above, compute the value of the call option.
Assume the below information to answer the following question. Last Price A. 14.2% B. 18.9% OC. 16.8% OD. 11.0% Company Coupon Maturity Ford (F) 11.0 July 31, 2014 Based on the above table, what is the last yield for this bond? Last Yield 65.50 ? EST EST VOL. Spread UST (000s) 104 10 5,100 }
Given the following information concerning a convertible bonds: Principal $1,000 Coupon 5% Maturity 15 years Call price $1,050 Conversion price $37 (i.e., 27 shares) Market price of the common stock $32 Market price of the bond $1,040 F. What is the premium in terms of debt that the investor pays when he or she purchases the convertible bond instead of a nonconvertible bond? G. If the price of the common stock should double, would the price of the convertible bond double? Briefly explain your answer? H. If the price of the common stock should decline by 50 percent, would the price of the convertible bond decline by the same percentage? Briefly explain your answer. I. What is the probability that the corporation will call this bond? J. Why are investors willing to pay the premiums mentioned in parts (d) and (f)
1. Three months ago an investment company bought for £8 a call option on a stock with an exercise price of £136. If the stock price at expiration of this option is £147. Select which of the following best describes the option value, the decision of the Investment Company and the return on investment thereon. A. Option value Decision Profit / (loss) % Exercise price – Stock price Exercise 37.5% B. Option value Decision Profit / (loss) % Stock price – Exercise price Don’t Exercise 2.2% C. Option value Decision Profit / (loss) % Exercise price – Stock price Exercise 2.2% D. Option value…
A put and call on the same underlying share each have strike price 25 and expiry date 2 years. Which portfolio will give a payoff-IS(2)-25), where S(2) is the price of the stock in 2 years. Select one: O a. going long one put and long one call O b. going short one put and long one call Oc. going long one put and short one call Od: going short one put and short one call
1.) The option is currently a.) In-the-money b.) At-the-money c.) Out-the-money 2.) In/At/Out- the money by _____ pesos. 3.) What is the Intrinsic Value

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