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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Similar questions

Consider the convertible bond by ABC Company: Par value = $1,000 Coupon rate = 8.5% Market price of convertible bond = $900 Conversion ratio = 30 Estimated straight value of bond = $700 Assume that the price of ABC Company's common stock is $25 and that the dividend per share is $1 per annum Calculate each of the following: a) Conversion value b) Market conversion price c) Conversion premium per share d) Conversion premium ratio e) Premium over straight value
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
1 A long forward contract on a dividend-paying stock was entered into some time ago. It currently has 6 months to maturity. The risk-free rate of interest (with continuous compounding) is 7% per annum, the stock price is 65 dirhams and the delivery price is 60 dirhams. The average dividend rate is 2%. (a) Determine the value of this long forward contract. (b) Determine also the value of the short forward contract in this casa. (e) What can be said about the relationship between these two values?
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)
What is the fair market value of a perpetual preferred share just after payment of a quarterly $1.25 dividend? The market requires a dividend yield of 8% compounded semiannually on shares of similar risk.
Given the following information for a stock, forward contract and interest rates: • Current bid price per share of the stock: $120 • Current ask price per share of the stock: $121 • Annual continuously compounded dividend rate for the stock: 3% • Annual continuously compounded interest rate for borrowing: 2% • Annual continuously compounded interest rate for lending: 1.5% • Fee for each stock transaction: $1.5 • Fee for each forward contract transaction: $1.5 Calculate the lower bound for 2-year forward price per share of the stock, below which a profitable arbitrage can be obtained (keep 2 decimal places in your answer).
4. Shares of ABC Ltd are currently traded at Rs .1770. A call option with a strike price of 1750 and expiring in 90 days is traded at Rs.60 while a put with same strike price and maturity is traded at Rs .25. Show the payoff profile of a long straddle position using these options assuming that the share price on expiry date falls in the range of 1550 to 1950 at intervals of Rs.50. Also show the payoff diagram.
Questions 1. A 18-month forward contract on a non-dividend-paying stock is entered into when the price of a stock is $35 and prevailing 18-month continuous compounding risk-free interest rate is 3%. How can an arbitrageur lock in a risk-free profit if the forward price of the stock is relatively lower by $3?
Please answer the highlighted questions with explanation
Consider a convertible bond trading at $1,000 with a conversion ratio of 37.383, coupon rate of 9.5%, and par value of $1,000. If the firm's stock trades at $23 and provides an annual dividend of $0.75, what is the premium payback period? 1.81 1.99 2.23 2.09 <-000
Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation Exercise price Stock price 41% per year $42 $41 Annual interest rate 7% Dividend Calculate the value of a call option. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of a call option

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