stock price of Merck falls to $46, rate of return of your put option is

Q: Claim Denied Insurance Company has a beta of 1.2. Assume that the risk-free rate of return is 5%,…

A: Following details are given in the question for Claim Denied Insurance Company: Beta = 1.2 Risk free…

Q: Assume you buy 20 put options  at a price of $5 each. The stock is currently priced at $46 and the…

A: option index call or put give owner right to purchase or sell on mentioned date but no obligation…

Q: A stock price is $30. An investor buys one call option contract on the stock with a strike price of…

A: The possible profit or loss that an investor may experience after purchasing a call option at $28…

Q: question is related to FINANCIAL RISK MANAGEMENT

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: The value of an option is $5.64, its theta is 0.03. What will be the expected price of the option on…

A: The rate at which the value of an option declines with time is called as theta. It is written as a…

Q: You just purchased Stock X at $40 and a put option at $1. The strike price of the put is $37. (a)…

A: A put option buyer or put option holder always expects the price of the asset under the option may…

Q: Up (percentage of price change) Down (percentage of price change) Initial stock price, S_0 interest…

A: The solution is the binomial option pricing theorom. I have provided the excel solution as required…

Q: The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to…

A: The objective of this question is to calculate the risk-neutral probability of the stock price…

Q: An investor buys a put option with an exercise price of $40 when the stock price is $42. The option…

A: to sell the stock at the given strike price, if the stock price comes below the strike price, the…

Q: Using just a put option (which controls 100 shares) with a delta of -0.75 and a position in the…

A: Delta neutral is a portfolio approach in which positive and negative deltas are balanced across…

Q: Suppose a trader buys a stock at $70, buys a put option on the same stock with strike X at a price…

A: In trader have long position on stock and long positions on put. Traders make profit on long…

Q: uppose you bought stock XYZ December RM8 put options for40 sen. What is the strike price? Suppose…

A: Put option gives the opportunity to sell the stock on expiration but no obligations to do that. Put…

Q: The value of an option is $3.16, its vega is 0.7. What will be the expected price of the option if…

A: Vega of an option will measure the impact of changes in volatility on the price of an option.

Q: Whats the profit of the "Straddle" when stock price is $15, $20, $25, $30, $35, $40, $45, $50, $55,…

A: In the given question we require to calculate the profit of the "Straddle" when stock price is $15,…

Q: at on ATH Berhad stock 1l on ATH Berhad stock RM 0.10 RM 0.50 ing the options have 15 days left to…

A: in this problem we have to calculate the price of call and put option.

Q: Label the following for this diagram a. Name of options payoff b. identify whether positive or…

A: The option held by the option holder is long put.  The requirement is only d and e questions.

Q: Suppose that put options on a stock with strike prices $18 and $20 cost $2 and $3.50, respectively.…

A: A put option provides the right for selling the stock at a specified price but not the obligations…

Q: 13. The slope of the security market line is A. equal to one. B. beta. C. market risk premium. D.…

A: Note : As per the bartelby guidelines only first part will be answered.  Explanation : In simple…

Q: Suppose you bought a put option with a strike price of $21 for $3. What would be your profit from…

A: A put option gives the owner the right, but not the obligation, to sell the underlying asset at the…

Q: A PUT and a CALL option are written on a stock with a strike price of $60. The options are held…

A: Strike Price = $60 Spot price = $75 Call premium = $16 Put Premium = $3

Q: The value of an option is $6.24, its delta is 0.5, and the price for the underlying stock is $82.…

A: Delta of an Option helps in determining the change in value of an option due to change in price of…

Q: 1. A stock is now at $110. In a year its price will either be ssuming that the interest rate is r =…

A: Call value at a point in time is calculated as shown below. Call value=MaxStock price-Strike price,…

Q: Using the following information, calculate the overall payoff on the option given the stock price at…

A: The term "overall payoff" typically encompasses the comprehensive return or benefit derived from…

Q: A stock with a current market price of $50 has an associated put option priced at $6.5. This put…

A: The put option is the option for selling an underlying security. It is a bearish position which will…

Q: suppose that you have a call option that is at 1.30. it has a Delta of .35 a Gamma of .06 a Theta of…

A: These terms collectively known as "Greeks" and they provide a way to measure the sensitivity of an…

Q: Suppose that you have a call option that is at 1.30. it has a Delta of .35 a Gamma of .06 a Theta of…

A: These terms collectively known as "Greeks" and they provide a way to measure the sensitivity of an…

Q: ercise price of

A: In such a strategy, you pay money for both call and put option=  Given strike price for call   X1 =…

Q: You buy a put and a call on a stock that expire at time T. They are European options. Both the put…

A: Buying both put and call option on same for the same expiration date and same strike price on the…

Q: A stock price is currently $23. A reverse butterfly spread (le. options are sold with strike prices…

A: To determine the gain in each scenario, let's analyze the reverse butterfly spread strategy created…

Q: stock has a spot price of $35. Its May options are about to expire. One of its puts is worth $5 and…

A: Options are derivative products that means these derive value from underlying assets and gives…

Q: In follow an Ito process with >0, a stock is worth $80 today, if the price of an option that pays…

A: To price the option, we need to use the Black-Scholes formula, which is a mathematical formula used…

Q: b. identify whether positive or negative premium cidentify break-even point

A: From the given graph, we can observe: Option = Long Put (Mentioned) Strike price = $40…

Q: You buy a share of stock, write a 1-year call option with X= $55, and buy a 1-year put option with…

A: Call option writing refers to selling a call option to another investor where the buyer has complete…

Q: A. Construct a table showing how profit varies with stock price for the butterfly spread. B. Plot…

A: Call options on a stock are available with strike prices of $15, $17.5 and $20. So, the stock price…

Q: If the stock price increases, the price of a put option on that stock ________ and that of a call…

A: Options gives right to buy or sell the stocks on the maturity by payment of small premium but there…

Q: Given the following information, predict the put option's new price after the stock's volatility…

A: Since the Vega value usually represents the change in option price for a 1% change, and typically…

Q: Use the binomal option pricing model to estimate the Call price.…

A: In the binomial option pricing model, the call price up (Cu) and call price down (Cd) are calculated…

Q: Please show step by step work (not in excel): What is the call option premium given the following…

A: Stock price - $36.00 Volatility - 16% Strike price - $30.00 Dividend Yield - 0.00 Riskfree rate -…

Q: At time t=0 Mr. Anderson sets up a riskless portfolio by taking a position in an option and in the…

A: Hello. Since your question has multiple parts, we will solve the first question  for you. If you…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.