On 12 August 2009 Bank of America (BAC) stock closed at $15.93. On the same date, a January 2010 call and a put on BAC with exercise price X = 16 traded at $2.25 and $2.37 respectively. Both options expire 15 January 2010. • Compute the implied volatility for each of the options. Assume that the annual, continuously-compounded, interest rate is r = 1.5% • How do the implied volatilities compare to the annualized historical volatility of BÁC returns over the last 5 years? And the last year? • Assume that put-call parity holds and that the call is priced correctly. What should be the price of the put? Please show your work in excel %3D

On 12 August 2009 Bank of America (BAC) stock closed at $15.93. On the same date, a January 2010 call and a put on BAC with exercise price X = 16 traded at $2.25 and $2.37 respectively. Both options expire 15 January 2010. • Compute the implied volatility for each of the options. Assume that the annual, continuously-compounded, interest rate is r = 1.5% • How do the implied volatilities compare to the annualized historical volatility of BÁC returns over the last 5 years? And the last year? • Assume that put-call parity holds and that the call is priced correctly. What should be the price of the put? Please show your work in excel %3D

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

See similar textbooks

Similar questions

ExxonMobil shares and a pair of 3‐month options with strike price of $30 are trading at the prices in the table below. Assuming the 3‐month risk‐free interest rate (with continuous compounding) is 10% p.a. There is no arbitrage opportunity in this set of prices. Share price Call premium Put premium $32.00 $3.55 $0.81 True False
On Jan 18 2022, SPY (the ETF) closed at 456.02. The short-term interest rate is 0.25%. Assume no dividend payments before the February 18 expiration. The minimum value of the February 2022, K = 454, Call option, on Jan 18 2022 was 2.02 larger than 2.02 smaller than 2.02, but not zero zero
Suppose the 180-day S&P 500 futures price is 1,404.98, while the cash price is 1,390.2. What is the implied dividend yield on the S&P 500 if the risk free interest rate is 3.5 percent? (Round your answer to 2 decimal places. Omit the "%" sign in your response.) Implied dividend %
A call option is currently selling for $5.30. It has a strike price of $60 and six months to maturity. A put option with the same strike price sells for $7.80. The risk-free rate is 4.3 percent, and the stock will pay a dividend of $2.80 in three months. What is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Current stock price $
Suppose that the risk-free interest rate is 6% per annum with continuous compounding and the dividend yield on a stock index is 4% per annum. The index is standing at 400 and the futures price for a contract (on that index) deliverable in 9 months is 405. What arbitrage opportunity does this create? • Borrow to buy shares underlying the index and enter a short position in index futures contracts • Enter a long position in index futures contracts, short sell shares underlying the index and invest excess funds • Borrow to buy shares underlying the index and enter a long position in index futures contracts • Enter a short position in index futures contracts, short sell shares underlying the index and invest excess funds • No arbitrage opportunity
The value of the S&P 500 index is 4,815. The continuously compounded risk - free rate is 5.5% and the continuous dividend yield is 1.1% . You consider trading 1 E- mini futures on the S&P 500 (symbol: ES) with a contract unit of $5 x S&P 500 Index listed on CME and 115- days to expiration. a. Calculate the no - arbitrage futures price of the position. b. Calculate the value of a long futures position after 46 days if the index value is $3,852.
Nn.198. Subject :- Finance
PLEASE GIVE ME THE CORRECT ANSWER
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)
please only answer part D
A stock will pay a dividend of $3 in 4 months and $4 in 8 months. The current price of the stock is $408. If the risk-free rate for all maturities is 5.19%, what is the arbitrage profit of a 12-month forward contract on the stock if its current price is $600? Group of answer choices $230.685 $195.195 $177.45 $195.195 $221.813
Information about three securities appears next. Stock 1 Stock 2 Bond 1 Beginning-of-Year Price Stock 1 Stock 2 Bond 1 $ 44.20 $ 2.95 $ 1,190 End-of-Year Price $ 48.45 $3.18 $ 1,218 a. Assuming interest and dividends are paid annually, calculate the annual holding period return on each security. Note: Round your answers to 1 decimal place. X Answer is not complete. Annual Holding Period Return 16.9 % 7.8 % % Interest/Dividend Paid $ 3.20 $.00 $ 58.00

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS