Problem 15-17 Option Strategies (LO3, CFA5) You write a put with a strike price of $30 on stock that you have shorted at $30 (this is a "covered put"). What are the expiration date profits to this position for stock prices of $20, $25, $30, $35, and $40 if the put premium is $1.90? (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock price Short profit $ $ $ $ $ 20.00 25.00 30.00 35.00 40.00 Put payoff Put profit Net profit

Problem 15-17 Option Strategies (LO3, CFA5) You write a put with a strike price of $30 on stock that you have shorted at $30 (this is a "covered put"). What are the expiration date profits to this position for stock prices of $20, $25, $30, $35, and $40 if the put premium is $1.90? (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock price Short profit $ $ $ $ $ 20.00 25.00 30.00 35.00 40.00 Put payoff Put profit Net profit

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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HELP WITH 4 PLEASE Consider a two period economy. You can buy stocks in period 0, and then sell them in period 1. You can also enter into futures contracts in period 0, which expire in period 1. Suppose a stock has a β of 0.5. The stock pays no dividends, and is trading at $100. The market has an expected return of 10%. The interest rate is 2%. Suppose the CAPM holds. What is the stock’s expected return? What is the expected price of the stock in period 1? Consider a futures contract on the stock, expiring at t = 1. What is the fair price of the futures contract, in t = 1 dollars? Suppose you take a long position in the futures contract in period 0 (so, you promise to pay money, in exchange for getting the stock in period 1). When the futures contract expires in period 1, you receive the stock and immediately sell it. What is the expected amount you will pay in money for the stock? What is the expected amount you get from selling the stock? Since buying single-stock futures appears…
3
A4 answer the questions below
PLEASE ANSWER CORRECTLY ALL THE FALLOWING ******MAKE SURE YOU DONT NOT GIVE ME THE WRONG ANSWERS
HELP WITH 3 PLEASE Consider a two period economy. You can buy stocks in period 0, and then sell them in period 1. You can also enter into futures contracts in period 0, which expire in period 1. Suppose a stock has a β of 0.5. The stock pays no dividends, and is trading at $100. The market has an expected return of 10%. The interest rate is 2%. Suppose the CAPM holds. What is the stock’s expected return? What is the expected price of the stock in period 1? Consider a futures contract on the stock, expiring at t = 1. What is the fair price of the futures contract, in t = 1 dollars? Suppose you take a long position in the futures contract in period 0 (so, you promise to pay money, in exchange for getting the stock in period 1). When the futures contract expires in period 1, you receive the stock and immediately sell it. What is the expected amount you will pay in money for the stock? What is the expected amount you get from selling the stock? Since buying single-stock futures appears…
6
Data: S0 = 120; X = 126; 1 + r = 1.05. The two possibilities for ST are 150 and 102. Required: a-1. The range of S is 48 while that of C is 24 across the two states. What is the hedge ratio of the call? Note: Round your answer to 2 decimal places. a-2. Calculate the value of a call option on the stock with an exercise price of 126. (Do not use continuous compounding to calculate the present value of X in this example because we are using a two-state model here; the assumed 5% interest rate is an effective rate per period.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
S2 Q7 Given the following American put option prices and current underlying share price of $304.75, check to see whether the given put options violate the lower bound condition. Where you dettect a violation, devise an arbitrage strategy that will yield a positive cash flow now with zero possible cash flows in the future. Strike Put price 300 7.75 305 8.15 310 8.5 315 9.05
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Bt.9.
An increase in the rate of interest A fall in the level of demand A decrease in the rate of interest A stock sells P110. A call option on the stock with an exercise price of P105 and expires in 43 days. If the interest rate is 0.11 and the standard deviation of the stock's return is 0.25, what is the price of the CALL OPTION according to the Black-Scholes Model? P6.92 P8.05 T P7.68 P6.88 O Focu: States)
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