Assume that the Japanese yen is trading at a spot price of 68.13 cents per 100 yen. Further assume that thepremium of an American call (put) option with a strike price of 70 is 0.77 (1.57) cents per 100 yen. Calculatethe intrinsic value and the time value of the call and put options.

A call option is a financial instrument that gives the holder the right, but not the duty, to…

Answered: premium of an American call (put)…

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

A European put option on a barrel of crude oil with a strike price of $50 and a maturity of one-month, trades for $3.0. What is the price of the call premium with identical strike price and time until expiration, if the one-month risk-free rate is 2% and the spot price of the underlying asset is $52? NAME TYPE STRIKE PRICE PRICE AT EXPIRATION DATE A PUT 100 115 B CALL 100 95 C PUT 80 70 D CALL 80 95 A. Which of the following options are in the money? B. Which of the following options are out of the money? C. What is the intrinsic value of the C option? D. What is the upper bound and lower bound of the B option above?
Do not use chatgpt .
European put and call options both have an exercise price of GH¢50 that expires in 120 days.The underlying asset is priced at GH¢52 and makes no cash payments during the life of theoption. The risk-free rate is 4.5%. Find the price of the call option.
Suppose you buy one SPX call option contract with a strike of 2200. At maturity, the S&P 500 index is at 2218. What is your net gain or loss if the premium you paid was $14? (Input the amount as a positive value.)
Suppose you bought a December British pound call option with an exercise price of $1.3000/£. The option price was $0.02/£. How much is your payoff if the spot price is $1.3500/£ at expiration? $0 $0.03 $0.04 $0.05 $0.06
An option has a 40% (actuarial) chance of paying $7.03 when the underlying asset increases by 6.3% and a 60% (actuarial) chance of paying $8.67 if the underlying asset declines by 10.8%. Given that the risk-free rate is 3.6% p.a. and there are 3 months until this option is to expire, what is the risk-neutral price of this option? Answer:
Suppose we enter into a 76-day T-bill futures contract quoted at 0.021. The notional amount is $1,000. What is the actual price?
A speculator has purchased United States dollar put options, with an exercise price of A$1.30and a premium of A$0.05 per unit.(a) Calculate the break-even price.(b) Calculate the profit or loss of the option for the speculator if the spot rate at the time the speculator considers exercising the options is : (1) A$1.20 (2) A$1.28 (3) A$1.34.(c) What is the maximum profit and maximum loss for the speculator?
(c) A put option with a 420-exercise price on the FTSE 100 Index is currently at 11.75. The FTSE 100Index is at £411.79. Find the intrinsic value and the time value of this option.
If put options on USD with a strike price of AUD6.9/USD have a premium of AUD4.3, what is the break- even price (BEP) for a buyer or a seller of these options? Assume that there are no brokerage fees. Question Answer a. The buyer's BEP is AUD 2.6000 and the seller's BEP is AUD 11.2000 b. The buyer's BEP is AUD 2.6000 and the seller's BEP is AUD 2.6000 c. The buyer's BEP is AUD 11.2000 and the seller's BEP is AUD 11.2000 d. The buyer's BEP is AUD 11.2000 and the seller's BEP is AUD 2.6000 e. The buyer's BEP is AUD 6.9000 and the seller's BEP is AUD 11.2000
23. Assume that a speculator purchases a put option on British pounds (with a strike price of $1.50) for $.05 per unit. A pound option represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1.51 and continually rises to $1.62 by the expiration date. The highest net profit possible for the speculator based on the information above is: A) $1,562.50. B) -$1,562.50. C) -$1,250.00. D) -$625.00.
An investor has purchased United States dollar call options, with an exercise price of A$1.15 anda premium of A$0.03 per unit.(a) Calculate the break-even price. (b) Calculate the profit or loss of the option for the investor if the spot rate at the time the investor considers exercising the options is : (1) A$1.10 (2) A$1.17 (3) A$1.23.(c) What is the maximum loss for the investor?(d) Explain why the investor could have an unlimited profit if the options are exercised.(e) Explain in general the similarities of and differences between a currency call option and a currency put option.

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

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

premium of an American call (put) option with a strike price of 70 is 0.77 (1.57) cents per 100 yen. Calculate the intrinsic value and the time value of the call and put options.