Magenta Corporation has a put option which it purchased 30 days ago. The option originally has a term of 120 days. The underlying assets are 1,000 Zeta Corp. stocks with total current market value of P1,125,000. The total agreed price is P1,080,000. If the risk-free rate is 5% and the volatility of the stock price is P45%, how much is the total value of the option?

Magenta Corporation has a put option which it purchased 30 days ago. The option originally has a term of 120 days. The underlying assets are 1,000 Zeta Corp. stocks with total current market value of P1,125,000. The total agreed price is P1,080,000. If the risk-free rate is 5% and the volatility of the stock price is P45%, how much is the total value of the 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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The stock price of Top Gloves Bhd today is RM3.00. The call option on this stock with a strike price of RM2.00 and a 60 days maturity has an option premium of RM1.50. The put option with a strike price of RM2.00 and 60 days expiry possess a premium of RM1.20. The risk-free rate per annum is 5%. Required: (a) Prove that there is mispricing. (b) Suggest a suitable arbitrage strategy for this mispricing.
A stock trades for $45 per share. A call option on that stock has a strike price of $55 and an expiration date twelve months in the future. The volatility of the stock's returns is 44%, and the risk-free rate is 5%. What is the Black and Scholes value of this option? The Black and Scholes value of this call option is $ (Round to the nearest cent.)
The stocks of Cee Mobile Limited is currently trading at $73 each. The call option on the company's stock has an exercise price of $70, with fifty (50) days remaining to expiration. It is assumed that the yield on treasury bills is currently 2%, while the volatility of the stock price is estimated as being 35%. Required: i. Using the Black-Scholes-Merton (BSM) model, calculate the value of the Call option, given the above parameters. Show all relevant workings. ii. Of the value computed, how much is the intrinsic value and the time value of the Call option? iii. Using the BSM model and the information given above, calculate the value of the Put option on the stock, with a similar strike price and days to expiration.
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.)
A stock sells for $125. A call option on the stock has an exercise price of $110 and expires in 3 months. If the interest rate is 0.15 and the standard deviation of the stock’s return is 0.30. What would be the price of a put option on the same stock with an exercise price of $140 and the same time (3 months) until expiration? Show all workings. (See Appendix for the Cumulative Normal Distribution Table) b) Let the spot rate be Yen 100 / $ and the 3-month forward rate be Yen 99/$. Compute the interest rate differential between the U.S. and Japan at which interest rate parity will hold true.
A stock currently trades at $40, and the volatility of its return is 10%. The continuously compounded rate of interest is 12%. Consider a call option struck at $45, with 75 days to expiration (recall that there are 251 trading days in one year). a) What is the price of the option (rounded to the nearest cent)? Answer = $ . b) What is the option's delta (rounded to four decimal places)? Answer = . c) Use your answer from (b) to estimate the value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ . d) What is the exact value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ . [Note: Use software to compute the values of the normal CDF, not the table.]
There are call and put options on the shares in Nord AS with a redemption price of NOK 55 and one year to maturity. Today's share price is NOK 50. At the end of the year, the stock price will either be 30 kroner or 80 kroner. The risk-free interest rate of 3% per. year. a) What is the value of call options today? b) What is the value of the put options today if the put-buy parity holds? You have a portfolio of 2000 shares in Nord AS, but are starting to worry about that price. must fall. You therefore want to secure yourself by using options. c) Show how you can use call and put options to secure your position your. Explain.
IBM stock currently sells for 84 dollars per share. Over 8 months the price will either go up by 7.5 percent or down by -3.0 percent. The risk-free rate of interest is 4.5 percent continuously compounded. A call option with strike price 83 and maturity of 8 months has a delta of 0.82766. What is the value of this call option? 0.62579 O2.6708 O4.0788 2.9324 O4.3788
Generic Stock Inc. (GS) is trading at $100. A call option with a strike price of $102, which expires in 6 months, costs $9.52 (assuming a risk - free rate of 5% and a volatility of 0.33). What is the Delta of this option
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What is the value of a put option if the underlying stock price is $47, the strike price is $40, the underlying stock volatility is 52 percent, and the risk-free rate is 5.5 percent? Assume the option has 150 days to expiration. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) X Answer is complete but not entirely correct. Value of a put option $ 7.00
The current price of a non-dividend paying stock is $30. Use a two-step tree to value a European put option on the stock with a strike price of $32 that expires in 6 months. Each step is 3 months, the risk free rate is 896, and u = 1.1 and d = 0.9. O $2.24 $2.44 $2.64 $2.84

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