The current price of a non-dividend paying stock is $30. Use a two-step tree to value a European call option on the stock with a strike price of $32 that expires in 6 months. Each step is 3 months, the risk free rate is 8% per year with continuous compounding. What is the option price when u = 1.1 and d = 0.9? $1.29 O $1.69 $1.49 None of these $1.89
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- Binomial Model The current price of a stock is 20. In 1 year, the price will be either 26 or 16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of 21 and that expires in 1 year. (Hint: Use daily compounding.)Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?The current price of a non-dividend paying stock is $30. Use a two -step tree to value a European call option on the stock with a strike price of $32 that expires in 6 months. Each step is 3 months, the risk free rate is 8% per annum with continuous compounding. What is the option price when the volatility is 20%? (Hint: Calculate u and d using the CRR approach.) A. $1.48 B. $1.08 C. $1.68 D. $1.28
- The current price of a non-dividend paying stock is $60. Use a two-step tree to value an American put option on the stock with a strike price of $66 that expires in 2 years. Each step is 12 months, the risk free rate is 5% per annum, and the volatility is 30%. Which of the following is the closest to the option price? O $8.91 O $11.41 O $9.91 O $12.41The current price of a stock is $55. In 1 year, the price will be either $50or $65. The annual risk-free rate is 5.5%. The stock has an exercise price of $60 and expiresin 1 year.a. Find the range of values for the ending stock price and the call option at the option’sexpiration in 1 year.b. Equalize the range of payoffs for the stock and the option.c. Create a riskless hedged investment. What is the value of the portfolio in 1 year?d. What is the cost of the stock in the riskless portfolio?e. What is the present value of the riskless portfolio?f. From your answers in parts d and e, what is the value of the firm’s call option?Consider a stock with a current price of P $27 Suppose that over the next 6 months the stock price will either go up by a factor of 1.41 or down by a factor of 071. Consider a call option on the stock with a strike price of $25 that expires in 6 months. The nsk-free rate is 6%. (1) Using the binomial model, what are the ending values of the stock price? What are the payoffs of the call option? (2) Suppose you write one call option and buy N shares of stock How many shares must you buy to create a portfolo with a riskless payoff Ge, a hedge portfolio)? What is the payoff of the portfolio? 13)What.is the.present.value of the hedge port- Tolot What &the value of phe calt.option? (4) What s a teplieatirg portfolio What is 2otrage?
- The stock price of Copious Corp. is currently $30. The stock price 1 year(s) from now will be either $34 or $27. The annual risk-free rate is 1.4%. Using the binomial model, what is the value of a call option with an exercise price of $30 and an expiration date 1 year(s) from now?The current price of a stock is $20. In 1 year, the price will be either $26 or$16. The annual risk-free rate is 5%. Find the price of a call option on thestock that has a strike price of $21 and that expires in 1 year. (Hint: Use dailycompounding.)The current price of a stock is $20, and at the end of one year its price will be either $22 or $18. The annual risk-free rate is 2.0% (use daily compounding with 365 days/year), based on daily compounding. A 1-year call option on the stock, with an exercise price of $19, is available. Based on the binominal model, what is the option's value?(Please Show Work)
- Please answer below three requirements: Question- The current price of a non-dividend paying stock is $30. Use a two-step tree to value a put option on the stock with a strike price of $32 that expires in 6 months. Each step is 3 months, and in each step the stock price either moves up by 10% or moves down by 10%. Suppose that the risk free rate is 8% per annum with continuous compounding. 1) What should be the EUROPEAN put option price today? 2) If the option was an AMERICAN put option, what should be the price today? 3) If the volatility was given as 30%, how would the AMERICAN put option price change?Consider the following information on AAPL. The current stock price is $326.72. The call option has a strike price of $320. The price of the call option is $68. The option has 1 year till expiration. Question: Suppose you purchase the option at the current price and hold it until expiration. If the stock price at expiration is $350, the return on your investment is: -55.88% 44.11% -100% None of the aboveA put option and a call option with an exercise price of $55 and three months to expiration sell for $1.15 and $5.30, respectively. If the risk-free rate is 4.2 percent per year, compounded continuously, what is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current stock price