Given the following information,price of a stock:strike price of a six-month call:market price of the call:strike price of a six-month put:market price of the put:$102$100$6$100$3If an investor writes a put, the amount received is $

An option is a type of financial instrument that is based on the value of underlying securities,…

Answered: Given the following information, price…

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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Assume that an investor holds the following portfolio: short stock bought at a price 90$, long one 3- month maturity call option on the same stock with an exercise price of $88. a) Show the payoff structure of this portfolio at option expiration both numerically and graphically. b) Calculate the profit/loss on this position if stocks are selling at $80 on the option maturity date. Calculate the profit/loss on the position if the stocks are selling at $110. Call option premium is $5, while put option premium is $3. Ignore the transaction costs. c) Explain what kind of "bet" the investor is making. What must the investor in such a portfolio believe about the stock price to justify this position?
Given the following information, price of a stock: strike price of a six-month call: market price of the call: strike price of a six-month put: market price of the put: The maximum the seller of the put can lose is $ $102 $100 $6 $100 $3
A stock is currently priced at $42 and will move up by a factor of 1.24 or down by a factor of .93 each period over each of the next two periods. The risk-free rate of interest is 3 percent. What is the value of a put option with a strike price of $51? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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A collar is established by buying a share of stock for $54, buying a 6-month put option with exercise price $47, and writing a 6-month call option with exercise price $61. On the basis of the volatility of the stock, you calculate that for a strike price of $47 and expiration of 6 months, N(d1) = 0.7298, whereas for the exercise price of $61, N(d1) = 0.6374. Required: What will be the gain or loss on the collar if the stock price increases by $1? What happens to the delta of the portfolio if the stock price becomes very large? What happens to the delta of the portfolio if the stock price becomes very small?
A put with a strike price of $50 was sold at $11 when the price of the stock was $48. What was the time value of the put at expiration?
A stock is currently priced at 43.75 when options are about to expire. What is the net profit of a CALL option with a strike price of 45 for the BUYER of the option if the premium paid was 1.75? (per share) Group of answer choices 1.75 0.00 -2.25 -1.75 45.00
A stock is currently priced at $63 and has an annual standard deviation of 43 percent. The dividend yield of the stock is 5.2 percent, and the risk - free rate is 5.2 percent. What is the value of a call option on the stock with a strike price of $60 and 48 days to expiration? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Call option $
Which of the following call options on XYZ stock is most valuable? 1. Strike price = $ 40, 3 months to expiration 2. Strike price = $ 40, 3 months to expiration 3. Strike price = $ 50, 6 months to expiration 4. Strike price = $ 50, 6 months to expiration
You buy a share of stock, write a 1-year call option with X= $85, and buy a 1-year put option with X- $85. Your net outlay to establish the entire portfolio is $83.3. The stock pays no dividends. a. What is the payoff of your portfolio? Payoff b. What must be the risk-free interest rate? (Round your answer to 2 decimal places.) Risk-free rate %
A stock is currently priced at $61 and has an annual standard deviation of 41 percent. The dividend yield of the stock is 2.8 percent, and the risk-free rate is 4.8 percent. What is the value of a call option on the stock with a strike price of $58 and 52 days to expiration? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Call option $
Assume that a $60 strike call has a 2.0% continuous dividend, r = 5%, the stock price is $61.00, and the volatility is 20%. What is the theta of the option as the expiration time declines from 60 to 50 days? Answer to 2 decimal places. Correct Answers Between -0.2 and -0.18

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Given the following information, price of a stock: strike price of a six-month call: market price of the call: strike price of a six-month put: market price of the put: $102 $100 $6 $100 $3 If an investor writes a put, the amount received is $