Don't used Ai solution QUESTION 18Suppose a 6-month maturity call option with exercise price $80 currently sells for $10. Consider a portfolio with $5000 invested in three at-the-money callcontracts and $5000 in 6-month T-bills to earn 2% return. What's the portfolio return when the stock price becomes $105?a. 12.010Ob.-0.235Oc. 0.380O d. 0.760

Given:Call option details:Maturity: 6 monthsExercise price: $80Current price: $10$5000 invested in…

Answered: QUESTION 18 Suppose a 6-month maturity…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4MC

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Question 5: A call option on a stock that expires in a year has a strike price of $99. The current stock price is $100 and the one-year risk free interest rate is 10%. The price of this call is $6. a) Is arbitrage possible? What is the arbitrage position? b) do you het this minimum? Find the minimum arbitrage profit for this strategy. When
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Question 16 A call option with an exercise price of $40 and four months to expiration sells for $6.78. If the risk-free rate is 1.80% per year (compounded continuously) and the market price of a stock is $45, calculate the price of a put option on this stock $5.24 $5.00 $1.54 $2.50
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Suppose ABC's stock price is currently $25. In the next six months it will either fall to $15 or rise to $40. What is the current value of a six-month call option with an exercise price of $20? The six-month risk-free interest rate is 5% (periodic rate). [Use the riskneutral valuation method]A. $20.00 B. $8.57 C. $9.52 D. $13.10
QUESTION 3 Suppose you are attempting to value a one-year maturity option on a stock with volatility of 20% What would be the appropriate value for the down factor (d) if your binomial model is set up using 4 sub-periods (quarterly)? 0.946 O 0.869 0.942 0.827
QUESTION FIVE (5) a) The daily gain from a portfolio is normally distribute I with mean GHS20,000 cad standard deviation GHS 0.6 million. Using Besarket risk requirements, calculate the value at risk for determining mician capital b) Suppose that the spot price of a non-dividend-paying stock is $50, the 3-month forward price is $55, the 6-month USS interest rate is 10% per annum. Is there an arbitrage opportunity?

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