The following table shows premiums for one-year European put options: Strike Price $70 75 80 Put Premium $5.18 7.40 10.05 The risk-free annual rate of interest is 4% effective. The spot price at expiration is $72. X is the highest profit and Y is the lowest profit under the above three puts. Determine X - Y. (A) $.94 (B) $2.25 (C) $2.94 (D) $5.06 (E) $7.84

The following table shows premiums for one-year European put options: Strike Price $70 75 80 Put Premium $5.18 7.40 10.05 The risk-free annual rate of interest is 4% effective. The spot price at expiration is $72. X is the highest profit and Y is the lowest profit under the above three puts. Determine X - Y. (A) $.94 (B) $2.25 (C) $2.94 (D) $5.06 (E) $7.84

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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The price of an Australian Savings Bond (ASB) with no expiration date is originally $1,000 and has a fixed annual interest payment of $150. If the price of the ASB then falls by $100, what will be the interest rate yield to a new buyer of the ASB? Multiple Choice 16.7 percent 8.4 percent 13.6 percent О 15 percent 10 percent
Assume spot rate for Euro is $1.1900 and the three-month forward rate is $1.1710. What is the minimum price that a six-month American put option with a striking price of $1.220 should sell for in a rational market? Assume the annualized six-month Euro rate is 0.5 percent. O $0.0489 O $0 O $0.0300 $0.0389
An investor has purchased United States dollar call options, with an exercise price of A$1.15 anda premium of A$0.03 per unit.(a) Calculate the break-even price. (b) Calculate the profit or loss of the option for the investor if the spot rate at the time the investor considers exercising the options is : (1) A$1.10 (2) A$1.17 (3) A$1.23.(c) What is the maximum loss for the investor?(d) Explain why the investor could have an unlimited profit if the options are exercised.(e) Explain in general the similarities of and differences between a currency call option and a currency put option.
following questions: a. What is the mid-rate for each maturity? b. What is the annual forward premium for all maturities? (Click on the icon to import the table into a spreadsheet.) Period spot 1 month 2 months 3 months 6 months 12 months 24 months Period Bid Rate Spot 1.3267 1.3265 1.3263 1.3259 1.3250 1.3228 1.3179 a. What is the mid-rate for each maturity? Calculate the mid-rate for each maturity below: (Round to five decimal places.) Days Forward Ask Rate 0 1.3268 1.3266 1.3264 1.3262 1.3252 1.3233 1.3207 Bid Rate US$/€ 1.3267 Ask Rate US$/€ 1.3268 Mid-rate US$/€
Put–call parity (S21-1) It is possible to buy three-month call options and three-month puts on stock Q. Both options have an exercise price of $60 and both are worth $10. If the interest rate is 5% a year, what is the stock price?
A trader purchased an at the money 1 year OTC put option on the DAX index for a cost of Eur 10000. What is the traders minimum potential credit Exposure to the counter part over the term of the trade
13. The USDJPY spot price is 115.018 and the one month forward is 115.046. A one month expiration European style call option with a strike price of 115.046 is trading at 4¥ and a put option with the same parameters is trading at 5¥. If we purchase the call and sell the put sketch the payoff of this position at expiry (the expiration date) over the range 114.900 to 115.140. If we were going to hedge an exposure to the Yen should we use the option position or the forward? Justify your answer.
5. The European call option on Asset Q that expires in one year has strike price $32 and option price $4. The forward price of Asset Q in one year is $36. The annual continuously compounded interest rate is 0.08. Find the price of the put option on Asset Q with strike price of $32.
Please show the steps and calculations
Q.3Determine the risk-neutral value for a European put option (for a FLB (First Local Bank) share) that expires in eight months. The strike price is R500 and the current price is R650. The interest rate is 11%, and the volatility of the security is 0.026.
Suppose we wish to borrow $10 million for 3 months, and that the quoted Eurodollar futures price is 94.80. If the interest rate on the loan is based on the 3-month LIBOR rate, what will we pay to repay the loan (that is, the total amount we need to repay including principal and interest based on LIBOR)? Question 16 options: $10, 160, 000.00 $10, 130,000.00 $10, 115,000.00 $10, 640,000.00 $10,520,000.00
Find the PUT option price using the following data: S0 = $215 X = $220 Risk-free Int Rate = 5% Two possibilities of ST at expiration: $200 or $250 Expiration: 2 years from today

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