cash notional H A 2 year European cash binary call option with barrier level K = 110 and $1,000,000.0 is traded at $326,455.25. The current price of the underlying stock is 100. The risk free interest rate is 5 % ( continuous compounding). What is the fair value of a European cash binary put option of the same maturity and barrier level? (round numerical results to 2 decimal places) =

cash notional H A 2 year European cash binary call option with barrier level K = 110 and $1,000,000.0 is traded at $326,455.25. The current price of the underlying stock is 100. The risk free interest rate is 5 % ( continuous compounding). What is the fair value of a European cash binary put option of the same maturity and barrier level? (round numerical results to 2 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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Give typing answer with explanation and conclusion 5. A European call option on Home Depot stock has a strike price of $160 and expires in 0.9 years. Home Depot stock has a current market price of $165.99 and the risk-free rate is 4%. What must be the minimum price of the option?
The price of a stock, which pays no dividends, is $64 and the strike price of a one year European call option on the stock is $60. The risk-free rate is 3% (continuously compounded). What is the lower bound for the call option? A. $5.98 B. $5.77 C. $4.12 D. $2.17
The following 1-year European call options are available on the stock of Vega International, whose stock is trading at €72.50: Strike Price Call Price (€) (€) 60 8.00 75 3.00 90 2.00 What is the maximum profit realised at maturity from a long butterfly spread created from these call options? Assume a risk-free rate of 5%.
Kk.192.
What is the value of d, of a European call option on a non-dividend-paying stock when the stock price is $60, the strike price is $59, the risk-free interest rate is 5% per annum the volatility (Standard Deviation) is 30% per annum, and the time to maturity is three months? c=SN(d,)-Ke-N(₂) where and O√T OA02704 OB0.2167 *√T OC.0.3561 OD.0.1204
Q.3 Determine the risk-neutral value for a European put option (for a FLB (First Local Bank) share) that expires in eight months. The strike price is R500 and the current price is R650. The interest rate is 11%, and the volatility of the security is 0.026.
A6)
Melbourne Capital Ltd considers selling European call options on ANZ Bank Ltd for $1.50 per option. The current market price is $17.70 on 28th September 2020, the exercise price is $20, and the maturity of each call option is 6 months. (i) Under what circumstances does the investor make a profit? (ii) Under what circumstances will the option be exercised? (iii) How many call options should the investor sell to raise a total capital of $1,260,000?
A two-year European call option is written on a stock whose current price is $20. The stock will pay a dividend of $1 three months from now and another $1 one and half years from now. The strike price is $18, and the riskfree interest rate is 5%. Then the tightest lower bound for the call option value is, 6. $1.8976 $1.535 $1.194 a. b. с. d. $1.7976. Six-month call options with strike prices of $25 and $30 cost $4 and $3 respectively. Then the maximum possible gain and loss from a bear spread 7. formed using the two calls are respectively $10 and infinity $10 and $10 $1 and $4 $4 and $1 $10 and $5 а. b. c. d. е. Twelve-month European put options with strike prices of $35, $30, and $25 cost $7, $3.5, and $2 respectively. Then the maximum possible gain and loss from a butterfly spread formed using the three puts are respectively 8. a. $4.5 and infinity b. $4.5 and $0.5 $0.5 and $4.5 $3 and $0.5 $10 and $4.5 c. d. е. 9. A three-month call with a strike price of $20 costs $1. A three-month…
5. The European call option on Asset Q that expires in one year has strike price $32 and option price $4. The forward price of Asset Q in one year is $36. The annual continuously compounded interest rate is 0.08. Find the price of the put option on Asset Q with strike price of $32.
Single and multi-option arbitrage:
A put option with an exercise price of $56 will expire in 180 days. The underlying asset price of today is $160 . The underlying asset price at expiration is $126. The risk-free rate is 2%, What is the lower bounds for an European put?

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