The common stock of the XYZ Co. has been trading in a narrow range around $40 per share for months, and option with an exercise price of $40 is $3, and a call with the same expiration date and exercise price sells for How can you create a position involving a put, a call, and riskless lending that would have the same payoff str O Buy the call, sell the put; lend the present value of $40. Sell the call, buy the put; lend the present value of $40. Buy the call, sell the put; borrow the present value of $40. O Sell the call, buy the put; borrow the present value of $40.

The common stock of the XYZ Co. has been trading in a narrow range around $40 per share for months, and option with an exercise price of $40 is $3, and a call with the same expiration date and exercise price sells for How can you create a position involving a put, a call, and riskless lending that would have the same payoff str O Buy the call, sell the put; lend the present value of $40. Sell the call, buy the put; lend the present value of $40. Buy the call, sell the put; borrow the present value of $40. O Sell the call, buy the put; borrow the present value of $40.

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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At time t=0 Mr. Anderson sets up a riskless portfolio by taking a position in an option and in the underlying asset. Explain what Mr. Anderson needs to do at time t=1 to keep his portfolio risk neutral and why. A stock price is currently $100 and at the end of four months it will be ST . A derivative written on this stock pays off expST1/3 in four months. Given that u = 1.15, d = 0.87, and that the risk-free interest rate is 10% p.a. (continuously compounded), answer the following questions using a one-period binomial model (show all the details of your calculations and display the results with four decimal places): Calculate the value of ∆ Calculate the current value of the derivative.
Suppose that you sell for 8 dollars a call option with a strike price of 45 dollars, and you sell for 13 dollars each two put options with a strike price of 55 dollars. What is the minimum stock price at the exercise date that will result in you breaking even? Don't use Excel and chatgpt
he initial margin requirement on a stock purchase is 50% and the maintenance margin is 30%. You fully use the margin allowed to purchase 100 shares of XYZ at $25. If the price drop to the margin-call point, your broker will sell just enough of your shares to restore the initial margin requirement. How many shares will your broker sell Ignore interest on the loan.) Multiple Choice 334 400 462 667
Hi, i need help with this question. The answer should be: potentially infinite but I dont understand how to get there. Please explain, thanks! Question: You establish a short strangle on a company using December call and put options. The call option has a strike price of $50 and the put option has a strike price of $45. The premium on the call option is $4.80 and the premium on the put option is $5.40. What is your maximum loss on this position?
A call option with the strike price of ₹ 1900 costs ₹ 2.90 and a put option with strike price of ₹ 1850 costs ₹ 3.50 per share of Larsen and Tubro Ltd. Create a long strangle from these options. (Give the Table) What will be the profit pattern if the spot rate of the stock on expiration is 1400, 1450, 1550, 1600, 1650, 1750, 1850, 1950 per stock? (Lot size is 1000) Interpret the results by explaining characteristics of the strangle strategy. Also draw the diagram with proper labelling.
Suppose an investor sells 100 stocks by short selling for 6 months, the stock price is 30 yuan, and the annual interest rate of 6 months is fixed at 3%. How can I use forward contracts to avoid risks? What is the execution price? Please analyze if the stock price rises to 35 yuan or falls to 25 yuan after 6 months of hedging, what are the losses of this investor?
a) Draw the payoff patterns of i) a long call position ii) a long put position. b) A stock is currently trading at $155. The volatility of the stock price is 20% per annum and the risk-free rate is 8% per annum. What is the Black-Sholes price of a one-year call option with a strike price equal to $160? Assume that the stock will pay no dividends.
Assume that after one time period, the value of a stock of 80 would be either 120 Or 60. Suppose that, for any y, at a cost of Cy, one can purchase at a time-0 the option to buy y shares of the stock at time-1 at a price of 90 per share. For what values of C, no-arbitrage will be possible? Using the arbitrage theorem, find the value of C for the data given for your group in the above question Derive the first order partial derivative of the Black-Scholes option cost C with respect to r. (FOCUS ONLY OM THE LAST TWO )
Honeywell does not pay a dividend and its stock has a volatility of 28% and a current stock price of $67 per share. The risk-free interest is 4%. Determine the Black-Scholes value of a one-year, at-the-money call option on Honeywell's stock. (You must show me how you do this without an Excel-based option pricing model. That is, you must show your work with the formulas and Z-Tables. The value will likely be different than if you just plug into an Excel-based BSOPM). The call option's value is $. (Round to the nearest cent.)
Assume an interest rate of zero. A Call option and a Put option with the same exercise price, X = 100p are priced at 9p for the Call and 4p for the Put.The actual share is priced at S = 110p. Explain how you would exploit thearbitrage opportunity this presents. You must state which securities you would buy or sell. Show that the net cash position is 5p.

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