Question 30 The graph below shows the value of a 2-month, $40-strike call option as a function of the underlying stock price. The stock (which pays no dividends) has a volatility of 25%, and the risk-free interest rate is 8%. At which stock price would the option's gamma be greatest? 6.535 $40 $50 Option value $10 $2 50 530 $35 $40 $45 Underlying stock price $50 $50
Question 30 The graph below shows the value of a 2-month, $40-strike call option as a function of the underlying stock price. The stock (which pays no dividends) has a volatility of 25%, and the risk-free interest rate is 8%. At which stock price would the option's gamma be greatest? 6.535 $40 $50 Option value $10 $2 50 530 $35 $40 $45 Underlying stock price $50 $50
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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Transcribed Image Text:Question 30
The graph below shows the value of a 2-month, $40-strike call option as a function of the underlying stock price. The stock (which pays no dividends) has a volatility of
25%, and the risk-free interest rate is 8%. At which stock price would the option's gamma be greatest?
0 a $30
06.535
0-540
04345
0+ $50
Option value
$10
$2
$8
530
$35
$40
Underlying stock price
$45
$50
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