On November 1, 2011,Target stock closed at 50. You forecast that six months from that date Target stock price will be either $60 or $40. If the stock price rises to $60, then on November 1, 2012 the price will be either $70 or $50. If the stock price falls to $40, then on November 1, 2012 the price will be either $50 or $30. Using the BOPM, determine the value of two European put options on Target with the same exercise price of $55 that expires on May 2, 2012 and November 1, 2012,

Consider a particular stock with call and put options. The date is January 12, and the price of the stock is P185. The table below shows the closing prices of four options, two of which expire in February and May and have exercise prices of 175 and 205, respectively. The February options will expire on February 16th, while the May options will expire on October 20th. These specific selections are of the American style.

A stock is currently trading at $ 50. A three-month at-the-money European put option costs 3.37. The delta of the put is -0.431 and the gamma of the put is 0.039. Given these values, if the stock price decreases by $5.00, then the best estimate for the new value of the put is: Group of answer choices - 6.01 5.53 6.01 0.97

Use the data in the figure 20.1 and calculate thepayoff and the profits for investments in each ofthe following January expiration options, assumingthat the stock price on the expiration date is $125.a. Call option, X=$120b. Put option, X=$120c. Call option, X=$125d. Put option, X=$125e. Call option, X=$130f. Put option, X=$130

Consider a particular stock with call and put options. The date is January 12, and the price of the stock is P185. The table below shows the closing prices of four options, two of which expire in February and May and have exercise prices of 175 and 205, respectively. The February options will expire on February 16th, while the May options will expire on October 20th. These specific selections are of the American style.   Exercise Price February Calls May Calls February Puts May Puts 175 25.00 33.50 18.00 26.75 205 18.20 20.22 25.25 32.18   Consider the February call. Explain (with supporting calculations) that the option holder has no reason the option right now. When is the purchased justified? Explain (with supporting calculations) that, given February call at an exercise price is less likely also to be exercised. Suppose that the option buyer has an alternative to purchase May call instead of February call. Explain why May options are more…

The current price of a stock is $20. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 7%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Find the price of a call option on the stock that has a strike price is of $25 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.

You have the following information about LearnMore Inc.’s stock and a two-month call option with a strike price of $140.00. LearnMore Inc.’s current stock price is $100.00. You are using the multiperiod binomial option pricing model to find the value of the two-month option with two periods. ∏u∏u and ∏d∏d values given here apply to any period. Data Collected for LearnMore Inc.   u 1.5032 d 0.5922 ∏u∏u 0.2357 ∏d∏d 0.3555   You work with a junior analyst to calculate the value of the option, and she submits her inferences to you. Which of the following points are true in the case of LearnMore Inc.’s stock options? Check all that apply.   The option payoff if the stock goes up in two months will be $10.32.   The value of the two-month call option with a strike price of $140.00 at the end of two months will be $2.43.   The value of the call option will always remain $2.43, irrespective of the time until expiration.   LearnMore Inc.’s stock price…

There is a European put option on a stock that expires in two months. The stock price is $93 and the standard deviation of the stock returns is 68 percent. The option has a strike price of $101 and the risk-free interest rate is an annual percentage rate of 7 percent. What is the price of the put option today? Use a two-state model with one-month steps. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Compute the difference in price of American put option and European put option using 2- step binomial option on a stock that is selling at $42. The options will expire is 6-months and the risk-free rate is 12%. In each three-months period the price of stock will be either 10% high or 10% low. (A) $0.42 (B) $2.24 (C) $0.65 (D) S0.52

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. (Use the Cumulative Normal Distribution Table)   *Show manual workings. No Excel. You can type calculator inputs and outputs.