T-bills currently yield 3.6 percent. Stock in Deadwood Manufacturing is currently selling for $73 per share. There is no possibility that the stock will be worth less than $66 per share in one year. a-1. What is the value of a call option with a $50 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b-1. What is the value of a call option with a $48 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-1. What is the value of a put option with a $50 exercise price? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a-1. Call option value a-2. Intrinsic value b-1. Call option value b-2. Intrinsic value c-1. Put option value c-2. Intrinsic value

T-bills currently yield 3.6 percent. Stock in Deadwood Manufacturing is currently selling for $73 per share. There is no possibility that the stock will be worth less than $66 per share in one year. a-1. What is the value of a call option with a $50 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b-1. What is the value of a call option with a $48 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-1. What is the value of a put option with a $50 exercise price? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c-2. What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a-1. Call option value a-2. Intrinsic value b-1. Call option value b-2. Intrinsic value c-1. Put option value c-2. Intrinsic value

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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A stock price (which pays no dividends) is $48.08 and the strike price of a 2 year European put option is $56.63. The risk-free rate is 4% (continuously compounded). What is a lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound? Use 2 decimal places.
8. Two days before expiration date, Patty wants to sell a Call with strike price $100; i.e. she wants to go short on C100,t. The interest rate is r = 10%, and the current value of the stock is $120. Use the Put-Call Parity Equation to find a lower bound on the value of C100,1-
A stock is currently selling for $40.00 a share. What is the gain or loss on the following transactions? Use a minus sign to enter the amount as a negative value. Round your answers to the nearest cent. a. You take a long position and the stock's price declines to $37.35. -10.65 b. You sell the stock short and the price declines to $37.35. 10.65 c. You take a long position and the price rises to $50.65. $ 2.65 d. You sell the stock short and the price rises to $50.65. -2.65
You buy a share of stock, write a one-year call option with X = $26, and buy a one-year put option with X = $26. Your net outlay to establish the entire portfolio is $24.60. What is the payoff of your portfolio? What must be the risk-free interest rate? The stock pays no dividends. (Do not round intermediate calculations. Round "risk-free rate" to 2 decimal places.)
6. Assume you own Apple stock. The current price is $100. Assume a strike of $110 and expiration of 3 months. The premium is $4 for a call. Assume you use a covered call. What is the maximum profit you can make? Now assume you use a protective put with a premium of $6 and strike of $108 and the price falls to $90. What is the profit/loss?
In follow an Ito process with >0, a stock is worth $80 today, if the price of an option that pays the holder $2 exactly the first time the stock price reaches $200, what is the price of an option? Show all calculation.
27. Bonus Question: A one-year European call option on XYZ with a strike price of $220 is trading at $6.58. The current stock price for Microsoft is $218. Suppose that the risk-free rate is 1%, whereas the dividend yield on Microsoft is 0. According to the Black-Scholes model (BSM), what is the implied annual volatility? Choose the best answer. (a) 0.075 (b) 0.167 (c) 0.114 (d) 0.305 28. Bonus Question Use risk-neutral valuation to value a derivative at time t that pays off $1 at time T if the price at maturity, ST goes below K, i.e., ST < K. Let St denote the price of a non-dividend paying stock at time t. Express the risk-neutral price of the derivative using the spot price (St), the strike price (K), the risk-free rate (r), the stock volatility (o), and time to maturity (7 = T - t). Hint: recall that under risk-neutral valuation and GBM, the stock price is given by ST = Ste(r)T+0√TXE where ~ (a) Φ (b) (c) Φ N(0, 1) log()+(r-)T O√T (d) Φ log(5)-(r_²²2)r αντ log()+(r-2²)r O√T…
H2.
A.K. Scott’s stock is selling for $37 a share. A 3-month call on this stock with a strike price of $38 is priced at $2. Risk-free assets are currently returning 0.28 percent per month. a) What should be the price of a 3-month put option on this stock with a strike price of $38? b) Which of the two options is currently in the money and does that accord with your conclusions about their relative prices?
am. 118.
solve a,b,c and d please
Options2. Construct profit diagrams at expiration time to show what position in META puts, calls and/or underlying stock best expresses the investor’s objectives described below. META currently sells for $210 so that profit diagrams between $150 and $250 in $10 increments are appropriate. Assume that at-the-money puts and calls currently cost$30 each. The call with strike $190 costs $40 and the call with strike $230 costs $20. (a) An investor wants to benefit from META price drops but does not want to lose more than $30 on the investment. (b) An investor wants to have a positive payoff if the upcoming META earnings announcement is close to market expectations—meaning that the price will not move by more than $20 dollars.

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