Call options with a strike price of $80.00 and an expiration of two months were written when the underlying stock was trading at $82.19. Over the following month, the underlying stock volatility was 32.11% even though the implied volatility remained constant at 46.59%. The continuously compounded risk free rate is 3.00%. The options currently have one month until expiration and the underyling stock is now trading at $ 87.95. What is the option's current market price? Report your answer without a dollar sign to four decimal places.

Call options with a strike price of $80.00 and an expiration of two months were written when the underlying stock was trading at $82.19. Over the following month, the underlying stock volatility was 32.11% even though the implied volatility remained constant at 46.59%. The continuously compounded risk free rate is 3.00%. The options currently have one month until expiration and the underyling stock is now trading at $ 87.95. What is the option's current market price? Report your answer without a dollar sign to four decimal places.

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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An equity index is currently 1, 200. A fourteen month zero coupon bond costs 0.965 and a fourteen month forward on the index costs 1, 240. Calculate the value of the fourteen month continuously compounded dividend yield on the index. Explain the formulae you use
TDX stock is currently trading at $100. A 3-month call option in this stock has an exercise price of $105 and trading at $1 (the option premium). A put option with similar maturity period and strike price is trading at $0.5.i) Compute the theoretical value of call and put options if TDX stock price at the end of 3 months will be $95, or $100, or $105, or $110, or $115. ii) Draw diagrams showing TDX stock price and theoretical values of call and put. iii) If you purchase one stock and one put option today, what will be the total value of your portfolio at the end of 3 months? iv) Compute your return on investment or holding period return made in part (iii) above.
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9
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