Today is June 4, 2020. Stock X is selling at $150 per share. The stock has a dividend yield of 5% per year. There is a call option with an August 18, 2020 expiration date and an exercise price of $145, with an implied volatility of 20%. The annual risk free rate is 1%, compounded continuously. Shares and options can only be bought and sold in whole numbers. Requires Normal Probability Table see image June 5th data see image What are the gains/losses on shares and call options on June 5, 2020? Waht is the net change in the portfolio value?
Today is June 4, 2020. Stock X is selling at $150 per share. The stock has a dividend yield of 5% per year. There is a call option with an August 18, 2020 expiration date and an exercise price of $145, with an implied volatility of 20%. The annual risk free rate is 1%, compounded continuously. Shares and options can only be bought and sold in whole numbers. Requires Normal Probability Table see image June 5th data see image What are the gains/losses on shares and call options on June 5, 2020? Waht is the net change in the portfolio value?
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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Question
100%
S3 Q14
Today is June 4, 2020. Stock X is selling at $150 per share. The stock has a dividend yield of 5% per year. There is a call option with an August 18, 2020 expiration date and an exercise price of $145, with an implied volatility of 20%. The annual risk free rate is 1%, compounded continuously. Shares and options can only be bought and sold in whole numbers.
Requires Normal Probability Table see image
June 5th data see image
What are the gains/losses on shares and call options on June 5, 2020? Waht is the net change in the portfolio value?
Transcribed Image Text:Call Option delta=0.564
Change in Option value with respect to change in stock price represent delta.
Value of Option=0.564 x $152=$85.728
Transcribed Image Text:Normal Probability Table
IZ
0.02
0.04
0.00
0.0 0.5000 0.5040 0.5080 0.5120 0.5160
0.1 0.5398 0.5438 0.5478 0.5517 0.5557
0.2 0.5793 0.5832 0.5871 0.5910 0.5948
0.3 0.6179 0.6217 0.6255 0.6293 0.6331
0.4 0.6554 0.6591 0.6628 0.6664 0.6700
0.5 0.6915 0.6950 0.6985 o.7019 0.7054
0.6 0.7257 0.7291 0.7324 0.7357 0.7389
0.7 0.7580 0.7611 0.7642 0.7673 0.7704
0.8 0.7881 0.7910 0.7939 0.7967 0.7995
0.9 0.8159 0.8186 0.8212 0.8238 0.8264
0.8413 0.8438 0.8461 0.8485 0.8508
1.1 0.8643 0.8665 0.8686 0.8708 0.8729
1.2 0.8849 0.8869 0.8888 0.8907 0.8925
1.3 0.9032 0.9049 0.9066 0.9082 0.9099
1.4 0.9192 0.9207 0.9222 0.9236 0.9251
1.5 0.9332 0.9345 0.9357 0.9370 0.9382
1.6 0.9452
0.01
0.03
0.05
0.5199
0.06
0.5239
0.5596 0.5636
0.6026
0.07
0.5279
0.5675 0.5714 0.5753
0.6064 0.6103 0.6141
0.6443 0.6480 0.6517
0.6808 0.6844 0.6879
0.7157 0.7190 0.7224
0.7486 0.7517 0.7549
0.7794 0.7823 0.7852
0.8078 0.8106 0.8133
0.8340 0.8365 0.8389
0.8577 0.8599 0.8621
0.8790 0.8810
0.8980 0.8997 0.9015
0.9147 0.9162 0.9177
0.9292 0.9306 0.9319
0.9418 0.9429 0.9441
0.9525 0.9535
0.9616 0.9625
0.9693 0.9699 0.9706
0.9756 0.9761
0.9808 0.9812 0.9817
0.08
0.09
0.5319 0.5359
0.5987
0.6368
0.6736
0.6406
0.6772
0.7088 0.7123
0.7422 0.7454
0.7734 0.7764
0.8051
0.8315
0.8554
0.8770
0.8944 0.8962
0.9131
0.9265 0.9279
0.9406
0.9515
0.9608
0.9686
0.9744 0.9750
0.9798 0.9803
0.8023
0.8289
0.8531
0.8749
0.8830
0.9115
0.9394
0.9505
0.9599
0.9678
l0.9463
0.9474 0.9484 0.9495
0.9545
1.7 0.9554 0.9564 0.9573 o.9582 0.9591
1.8 0.9641 0.9649 0.9656 0.9664 0.9671
1.9 0.9713 0.9719 0.9726 0.9732 0.9738
0.9772 0.9778 0.9783 0.9788 0.9793
2.1 0.9821 0.9826 0.9830 0.9834 0.9838
2.2 0.9861 0.9864
2.3 0.9893
2.4 0.9918 0.9920 0.9922 0.9925 0.9927
2.5 0.9938 0.9940 0.9941 0.9943 0.9945
2.6 0.9953 0.9955 0.9956 0.9957 0.9959
2.7 0.9965 0.9966 0.9967 0.9968
2.8 0.9974 0.9975 0.9976 0.9977 0.9977
2.9 0.9981 0.9982 0.9982 o.9983 0.9984
0.9987 0.9987 0.9987 0.9988 0.9988
0.9633
0.9767
12
0.9842
0.9846 0.9850 0.9854 0.9857
0.9868 0.9871 0.9875
0.9896 0.9898 0.9901 0.9904
0.9878 0.9881
0.9909
0.9931
0.9946 0.9948
0.9961
0.9970 0.9971
0.9979
10.9985
0.9989
0.9992
10.9994
0.9884 0.9887 0.9890
0.9911
0.9932 0.9934
0.9949
0.9962
0.9972 0.9973 0.9974
0.9979
0.9985
0.9989
0.9992
0.9995
0.9916
0.9936
0.9951 0.9952
0.9963 0.9964
0.9906
0.9929
0.9913
0.9960
l0.9969
0.9978
0.9984
0.9989
0.9992
0.9980
0.9986
0.9990
0.9993
0.9995
0.9996 0.9996 0.9996
0.9997
0.9981
0.9986
3
3.1 0.9990 0.9991 0.9991
3.2 0.9993 0.9993 0.9994 0.9994 0.9994
3.3 0.9995 0.9995 0.9995
3.4 0.9997 0.9997 0.9997
3.5 0.9998
3.6 0.9998 0.9998 0.9999 0.9999 0.9999
3.7 0.9999 0.9999 0.9999 0.9999 0.9999
3.8 0.9999
3.9 1.0000
4
0.9990
0.9991 0.9992
0.9993
0.9995
0.9997
0.9998
0.9994
0.9996
0.9997
0.9998
0.9999
0.9999
0.9999
1.0000
1.0000
0.9996 0.9996
0.9997 0.9997
0.9998 0.9998
0.9997
0.9998
0.9999
0.9999
0.9999
1.0000
1.0000
0.9997
0.9998 0.9998 0.9998
0.9999 0.9999 0.9999
0.9999
0.9999 0.9999
0.9998 0.9998
0.9999
0.9999
1.0000
1.0000
0.9999
0.9999
1.0000
l0.9999
1.0000
1.0000
0.9999
1.0000
1.0000
0.9999
1.0000
1.0000
1.0000
1.0000 1.0000
1.0000
1.0000
1.0000
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