You purchase a call option for $6.48 with 20 weeks to expiration on a stock you expect toincrease 40.00%. The strike price of the option is $67.50The stock is currently priced at $67.50. Its standard deviation is 36.00%It pays a 0.00% dividend. The risk-free rate is 4.00%If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on youroptions trade as a percent (or decimal)?Use these values as a part of your calc's:N(d1) 0.98806N(D2) 0.98218O 339.46%O 309.34%362.74%325.62%O 378.37%

An option is an agreement between two parties granting one the opportunity to purchase or sell a…

Answered: If the stock rises exactly as you…

If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on your options trade as a percent (or decimal)?

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

You purchase a call option for $6.48 with 20 weeks to expiration on a stock you expect to
increase 40.00%. The strike price of the option is $67.50
The stock is currently priced at $67.50. Its standard deviation is 36.00%
It pays a 0.00% dividend. The risk-free rate is 4.00%
If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on your
options trade as a percent (or decimal)?
Use these values as a part of your calc's:
N(d1) 0.98806
N(D2) 0.98218
O 339.46%
O 309.34%
362.74%
325.62%
O 378.37%

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Assume that you have shorted a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months' time. a. If the stock is trading at $55 in three months, what will you owe? b. If the stock is trading at $35 in three months, what will you owe? c. Draw a payoff diagram showing the amount you owe at expiration as a function of the stock price at expiration. a. If the stock is trading at $55 in three months, what will you owe? If the stock is trading at $55 in three months, you will owe $ (Round to the nearest dollar.)
A stock is currently selling for $45. Over the next two periods, the stock will move up by a factor of 1.23 or down by a factor of .61 each period. A call option with a strike price of $54 is available. If the risk-free rate of interest is 3.2 percent per period, what is the value of the call option? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of the call option
A call option is currently selling for $5.00. It has a strike price of $85 and ten months to maturity. A put option with the same strike price sells for $8.10. The risk-free rate is 4.6 percent and the stock will pay a dividend of $2.60 in three months. What is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
A call option currently sells for $9.25. It has a strike price of $45 and six months to maturity. A put with the same strike and expiration date sells for $7.50. If the risk-free interest rate is 6.3 percent, what is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current stock price
A call option currently sells for $7.00. It has a strike price of $40 and five months to maturity. A put with the same strike and expiration date sells for $5.00. If the risk-free interest rate is 5 percent, what is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current stock price
Suppose a stock drops in value by 50% one week, then increases in value the next week by 75%. Is the value higher or lower than where it started? 1. The value of the stock is (lower or higher) than where it started. 2. If the value of the stock started at $100, then what is it worth now?
Consider a put option whose underlying asset is a stock index with 6 months to expiration and a strike price of $1000. Suppose the risk-free interest rate for the six months is 2% and that the option’s premium is $74.20. (a) Find the future premium value in six months. (b) What is the buyer’s profit is the index spot price is $1100? (c) What is the buyer’s profit is the index spot price is $900 Only typed answer
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