In excel, please solve the following problem... The current price of Natasha Corporation stock is $ 5.92. In each of the next two years, this stock price can either go up by $2.50 or go down by $ 2.00. The stock pays no dividends. The one-year risk - free interest rate is 3.7% and will remain constant. Using the Binomial Model, calculate the price of a two-year call option on Natasha stock with a strike price of $7.00. What is the price of the two year call option?

In excel, please solve the following problem... The current price of Natasha Corporation stock is $ 5.92. In each of the next two years, this stock price can either go up by $2.50 or go down by $ 2.00. The stock pays no dividends. The one-year risk - free interest rate is 3.7% and will remain constant. Using the Binomial Model, calculate the price of a two-year call option on Natasha stock with a strike price of $7.00. What is the price of the two year call 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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Assume that the current stock price is $50 per share, that call options can be purchased with an exercise price of $60 per share, that bank loans can be obtained for a 10 percent nominal rate, and that at expiration of the option in three months, the stock will either be valued at $30 or $70. Show that it is possible to replicate the stock payoff by borrowing and buying a call option.
The price of Cilantro, Inc., stock will be either $70 or $90 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 6 percent. a. Suppose the current price of the company’s stock is $80. What is the value of the call option if the exercise price is $60 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose the current price of the company’s stock is $80. What is the value of the call option if the exercise price is $75 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
The current stock price of Chocho inc is $125. You expect the stock price a year from now to be either $134 or $86 with equal probabilities. The interest rate at which investors can borrow is 13%. Using the binomial opm, what should be the price (premium) of a call option with an exercise price of $115.00 and an expiration date one year from now?
The current price of Natasha Corporation stock is $6.00. In each of the next two years, this stock price can either go up by $2.50 or go down by $2.00. The stock pays no dividends. The one-year risk-free interest rate is 3.0% and will remain constant. Using the Binomial Model, calculate the price of a two-year call option on Natasha stock with a strike price of $7.00. The price of the two-year call option is $ (Round to the nearest cent.)
Suppose that you plan to invest in stock A, because you believe that stock A will appreciate in the next 6 months. The stock current price is $100, and a call option on stock A expiring in 6 months has an exercise price of $100 selling at $15 per option. And you have $7500 in hand to invest the following three strategies: A: Invest entirely in stock A. B: Invest entirely in call option on stock A. C: Buy call options the amount of calls is same as the number of shares we purchase in strategy A, and invest the remaining money in T-bills at interest rate whose annual interest rate is 10%. Suppose that the possible stock price are $90, $100, $110, and $120. (a) At expiration (after 6 months), compute the rates of return for each strategy given different possible stock prices. We don't consider the premium we’ve paid for holding call options in this case. (b) Given different stock price at expiration, which strategy would you like to choose? For example, if the stock price is $90, which…
Suppose Carol's stock price is currently $20. If the standard deviation of the continuously compounded returns (σ) on a stock is 60 percent per year. The monthly risk-free rate is 1 percent. Using one-step binomial tree, what is the current value of a six-month call option with an exercise price of $15?
The current price of KD Industries stock is $20. In the next year the stock price will either go up by 20% or go down by 20%. KD pays no dividends. The one-year risk-free rate is 5% and will remain constant. Using the binomial pricing model, the calculated price of a one-year put option on KD stock with a strike price of $20 is closest to:
Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $99.00 and expires in 85 days. The current price of Up stock is $122.83, and the stock has a standard deviation of 35% per year. The risk-free interest rate is 6.95% per year. Up stock pays no dividends. Use a 365-day year. a. Using the Black-Scholes formula, compute the price of the call. b. Use put-call parity to compute the price of the put with the same strike and expiration date. (Note:Make sure to round all intermediate calculations to at least five decimal places.)
The current price of a stock is $22, and at the end of one year its price will be either $29 or $15. The annual risk-free rate is 3%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binominal model, what is the option's value?
The price of Chive Corp. stock will be either $67 or $91 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 4 percent. a. Suppose the current price of the company's stock is $75. What is the value of the call option if the exercise price is $65 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Suppose the current price of the company's stock is $75. What is the value of the call option if the exercise price is $80 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Call value b. Call value
The current price of a stock is $22, and at the end of one year its price will be either $29 or $15. The annual risk-free rate is 3%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $22, is available. Based on the binominal model, what is the option's value?

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