Q6: Dayo is long a bear spread with strike prices 9.00 and 19.00. The options expire in 12 months, the spot price is $12.50, the stock volatility is 55.00%, the risk free interest rate is 5.75% and the stock dividend rate is 0.00. Dayo delta hedges the position initially and then doesn't adjust the delta hedge. One month later the stock price is still the same. How much does delta change? A) 0.02407 B) 0.02721 C) 0.02093 D) 0.01088

Q6: Dayo is long a bear spread with strike prices 9.00 and 19.00. The options expire in 12 months, the spot price is $12.50, the stock volatility is 55.00%, the risk free interest rate is 5.75% and the stock dividend rate is 0.00. Dayo delta hedges the position initially and then doesn't adjust the delta hedge. One month later the stock price is still the same. How much does delta change? A) 0.02407 B) 0.02721 C) 0.02093 D) 0.01088

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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Q4: TFS pays no dividends, and is trading at $103.00 with a volatility of 35.00%. The risk free rate is 10.00%. Construct a one step binomial tree (using the method u = option expiring in 12 months. Which of the following strike prices is the smallest one at which the put would be exercised early (at time t = 0)? elr-8)T+ovT ete.) to price an American style put A) $128.00 B) $129.00 C) $133.00 D) $124.00 E) $130.00
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.]
Consider an American put option (K=$100) expiring in one year on a stock trading for $84. The return volatility on the stock is 27.3% and the riskless rate is 5%. Find the price of the option using a Binomial Model with two steps. (Respond with two decimal places, such as "-12.34") 26.59 Correct Answer: 18.28
A stock is currently priced at $63 and has an annual standard deviation of 43 percent. The dividend yield of the stock is 5.2 percent, and the risk - free rate is 5.2 percent. What is the value of a call option on the stock with a strike price of $60 and 48 days to expiration? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Call option $
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
A stock is currently priced at $61 and has an annual standard deviation of 41 percent. The dividend yield of the stock is 2.8 percent, and the risk-free rate is 4.8 percent. What is the value of a call option on the stock with a strike price of $58 and 52 days to expiration? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Call option $
Consider a non-dividend paying stock that is currently trading at Rs.540. You entered into a short forward contract some time back at a strike price of Rs.595. The continuously compounded risk-free rate is 8% per annum and currently it has 9 months to maturity. The current forward price should be __________and value of the forward contract is_______. Rounded off to three decimal places.
a) Draw the payoff patterns of i) a long call position ii) a long put position. b) A stock is currently trading at $155. The volatility of the stock price is 20% per annum and the risk-free rate is 8% per annum. What is the Black-Sholes price of a one-year call option with a strike price equal to $160? Assume that the stock will pay no dividends.
Q6: Dayo is long a bear spread with strike prices 9.00 and 19.00. The options expire in 12 months, the spot price is $12.50, the stock volatility is 55.00%, the risk free interest rate is 5.75% and the stock dividend rate is 0.00. Dayo delta hedges the position initially and then doesn't adjust the delta hedge. One month later the stock price is still the same. How much does delta change? A) 0.02407 B) 0.02721 C) 0.02093 D) 0.01988 E) Ii depends on whether she used put options or call options for the initial position.
b. Your broker suggests two stocks as good to purchase; stock GAAB and stock PUFF. The two stocks each pay a GHS 1.5 dividend that is growing annually at 9 percent. Stock GAAB has a beta of 1.4 while stock PUFF's beta is 0.85. Which stock is more volatile and why? If treasury bills yield 8 percent and you expect the market return to rise by 15.5 percent, what is your risk-adjusted required rate of return? i. ii.
The risk-free rate is 1.54% and the market risk premium is 8.58%. A stock with a β of 1.39 just paid a dividend of $1.30. The dividend is expected to grow at 22.14% for five years and then grow at 3.47% forever. What is the value of the stock? Don't use any AI otherwise I will give.......

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