Contract size (in number of shares) 1,000 Strike price for an ABC Inc. share 124 Current value of an ABC Inc. share 130 Time to expiration (in months) Volatility 10% Risk-free rate 4% Based on the above, compute the value of the put option.

Contract size (in number of shares) 1,000 Strike price for an ABC Inc. share 124 Current value of an ABC Inc. share 130 Time to expiration (in months) Volatility 10% Risk-free rate 4% Based on the above, compute the value of the put option.

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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Question

Contract size (in number of shares)
1,000
Strike price for an ABC Inc. share
124
Current value of an ABC Inc. share
130
Time to expiration (in months)
2
Volatility
10%
Risk-free rate
4%
Based on the above, compute the value of the put option.

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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
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