The 6-months risk free rate is equal to 2% (Rf = 2%). By the end of the 6 %3D months period the stock will either increase by a factor of 1.3 or fall by a factor of 0.8. The current stock price is $110. Find the current price of the one year At the Money Call option relying on the replication approach. Use four decimal places in all calculations.

The 6-months risk free rate is equal to 2% (Rf = 2%). By the end of the 6 %3D months period the stock will either increase by a factor of 1.3 or fall by a factor of 0.8. The current stock price is $110. Find the current price of the one year At the Money Call option relying on the replication approach. Use four decimal places in all calculations.

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

See similar textbooks

Similar questions

The current price of a stock is $34, and the annual risk - free rate is 3 %. A call option with a strike price of $32 and with 1 year until expiration has a current value of $5.54. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent. Please answer fast i give you upvote.
A put option that expires in six months with an exercise price of $65 sells for $4.45. The stock is currently priced at $61, and the risk-free rate is 3.9 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Call price
The current price of a stock is $18. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. $
A put option that expires in six months with an exercise price of $65 sells for $4.45. The stock is currently priced at $61, and the risk-free rate is 3.9 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) X Answer is complete but not entirely correct. Call price $ 1.68 X
The current price of a stock is $34, and the annual risk-free rate is 3%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.12. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent.
Ll.9.
Use the Black–Scholes formula to value the following options:a. A call option written on a stock selling for $72 per share with a $72 exercise price. The stock's standard deviation is 6% per month. The option matures in three months. The risk-free interest rate is 1.50% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. A put option written on the same stock at the same time, with the same exercise price and expiration date. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Please do not use excel, show work step by step, thank you
A call option currently sells for $7.00. It has a strike price of $40 and five months to maturity. A put with the same strike and expiration date sells for $5.00. If the risk-free interest rate is 5 percent, what is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current stock price
Please show all steps
a. Use the Black-Scholes formula to find the value of the following call option. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) i. Time to expiration 1 year. ii. Standard deviation 40% per year. iii. Exercise price $84. iv. Stock price $84. v. Interest rate 4% (effective annual yield). b. Now recalculate the value of this call option, but use the following parameter values. Each change should be considered independently. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) i. Time to expiration 2 years. ii. Standard deviation 50% per year. iii. Exercise price $94. iv. Stock price $94. v. Interest rate 6%. c. In which case did increasing the value of the input not increase your calculation of option value? a. Call option value b-i. Call option value when time to expiration is 2 years. b-ii. Call option value when standard deviation is 50% per year. b-iii. Call option value when exercise price is $60. b-iv. b-v. C…
A stock price is currently $51. It is assumed that at the end of six months it will be either $30 or $74. The risk-free interest rate is 1.3% per annum with continuous compounding. The stock doesn't pay dividends. One-step binomial tree is used to value options. What is the value of a six-month European call option with a strike price of $51? Round your final result to the nearest cents and input one number only, without units or percentage sign [%], using the dot [.] to separate decimals. Your Answer: Answer
You Consider a stock with a price of $50 that is expected to increase by 6% or decrease by 8% each month over the next two months. Having a risk-free rate at 3% per year with continuous compounding, calculate the value of a two-month European put option with a strike price of $55. Repeat your calculations for a two-month American put option with a strike price of $55. Show clearly all your calculations and results with the use of the relevant equations and graphs. Discuss your investment decision in each case separately.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS