יThe following prices are available for call and put options on a stock priced at $50. The risk-free rate is 6 percent and thevolatility is 0.35. The March options have 90 days remaining and the June options have 180 days remaining. The Black-Scholes model was used to obtain the prices.CallsPutsStrikeMarchJuneMarchJune456.848.411.182.0950553.821.895.583.084.133.546.086.93Answer questions below a calendar spread based on the assumption that stock prices are expected to remain fairly constant. Use the June/March 50 call spread. Assume one contract of each.5What will the spread cost?

To calculate the cost of a calendar spread using the June/March 50 call options, we need to subtract…

Answered: י The following prices are available…

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

Assume that you have been given the following information on Purcell Industries' call options: Current stock price = $14 Strike price of option = $13 Time to maturity of option = 9 months Risk-free rate = 6% Variance of stock return = 0.16 d1 = 0.51704 N(d1) = 0.69744 d2 = 0.17063 N(d2) = 0.56774 According to the Black-Scholes option pricing model, what is the option's value?
The following prices are available for call and put options on a stock priced at $50. The risk-free rate is 6 percent and the volatility is 0.35. The March options have 90 days remaining and the June options have 180 days remaining. The Black-Scholes model was used to obtain the prices. Calls Puts Strike March June March June 45 6.84 8.41 1.18 2.09 50 3.82 5.58 3.08 4.13 55 1.89 3.54 6.08 6.93 Assume that each transaction consists of one contract (for 100 shares) unless otherwise indicated. What is the cost of the box spread if we are constructing a long box spread using the June 50 and 55 options? A. $76 B. $484 C. $2,018 D. $500
Assume that you have been given the following information on Purcell Corporation's call options: Inputs Intermediate Calculations Current stock price = $12 d1 = 0.32863 Time to maturity of option = 9 months d2 = 0.05477 Variance of stock return = 0.10 N(d1) = 0.62878 Strike price of option = $12 N(d2) = 0.52184 Risk-free rate = 7% According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the nearest cent. Use only the values provided in the problem statement for your calculations. $
Use the data in the figure 20.1 and calculate thepayoff and the profits for investments in each ofthe following January expiration options, assumingthat the stock price on the expiration date is $125.a. Call option, X=$120b. Put option, X=$120c. Call option, X=$125d. Put option, X=$125e. Call option, X=$130f. Put option, X=$130
A stock has a price of $37 and an annual return volatility of 59 percent. The risk-free rate is 3.13 percent. Perform calculations in Excel. a. Calculate the European call and European put option prices with a strike price of $38.00 and a 90-day expiration. (Use 365 days in a year. Do not round Intermediate calculations. Round your answers to 2 decimal places.) Call premium Put premium b. Calculate the deltas of the European call and European put. (Use 365 days In a year. A negative value should be Indicated by a minus sign. Do not round Intermediate calculations. Round your answers to 4 decimal places.) Call delta Put delta
Using the CAPM, estimate the appropriate required rate of return for the three stocks listed here, given that the risk-free rate is 6 percent and the expected return for the market is 14 percent. STOCK ВЕТА A 0.62 B 1.09 1.48 a. Using the CAPM, the required rate of return for stock A is %. (Round to two decimal places.) b. Using the CAPM, the required rate of return for stock B is %. (Round to two decimal places.) c. Using the CAPM, the required rate of return for stock C is %. (Round to two decimal places
Which one of the following stocks is correctly priced if the risk-free rate of return is 3.0 percent and the market risk premium is 7.5 percent? Expected Return 8.46% Stock A B с D E 0000С Stock A O Stock D Stock C O Stock E Beta 77 1.46 1.27 1.44 .95 Stock B 12.47 11.19 13.80 8.65
Excel Online Structured Activity: Black-Scholes Model Assume the following inputs for a call option: (1) current stock price is $29, (2) strike price is $36, (3) time to expiration is 5 months, (4) annualized risk-free rate is 4%, and (5) variance of stock return is 0.31. Use the Black-Scholes model to find the price for the call option. Do not round intermediate calculations. Round your answer to the nearest cent.
Consider the three stocks in the following table. Pt represents price at time t, and ot represents shares outstanding at time t. Stock C splits two for one in the last period. Stock Po A 50 B 45 с 90 120 20 P1 a. Rate of return b. Rate of return 21 60 60 60 120 35 120 95 120 02 60 60 35 120 50 240 P2 Required: Calculate the first-period rates of return on the following indexes of the three stocks (t = 0 to t = 1): Note: Do not round intermediate calculations. Round your answers to 2 decimal places. a. A market-value-weighted index. b. An equally weighted index. % %
can you do the question b please
1. You expect an RFR of 10 percent and the market return (RM) of 14 percent. Compute the expected (required) return for the following stocks, and plot them on an SML graph. (10 marks) Stock Beta E (RA) .20 U 0.85 N 1.25 D -0.20 2. You ask a stockbroker what the firm's research department expects for the three stocks in Question 1 above. The broker responds with the following information: Stock Current Price Expected Price Expected Dividend U ZD 22 24 0.75 N 48 51 2.00 37 40 1.25 Plot your estimated returns on the graph from question 1 and indicate what actions you would take with regard to these stocks. Discuss your decisions.
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?

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

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