Please show work. Thanks Q3: Use a two period binomial tree to price a 12 month European style putoption on YMMV struck at $16. The spot price of YMMV is $15.25 and itpays no dividends. Assume u/d= 4/3, Pup = 1/3, and r =- 9.75%.|3DA) $1.25B) $0.96C) $0.72D) $0.58E) $1.30

Financial derivatives known as call options and put options provide the holder the right, but not…

Use a two period binomial tree to price a 12 month European style put On on YMMV struck at $16. The spot price of YMMV is $15.25 and it = no dividends. Assume u/d = 4/3, Pup = 1/3, and r = = 9.75%. $1.25 $0.96 $0.72 $0.58 $1.30

Use a two period binomial tree to price a 12 month European style put On on YMMV struck at $16. The spot price of YMMV is $15.25 and it = no dividends. Assume u/d = 4/3, Pup = 1/3, and r = = 9.75%. $1.25 $0.96 $0.72 $0.58 $1.30

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 below call option is European. What is the minimum arbitrage profit at time T=1Y arising from the following prices? So = $19.63 T=1Y K = $18 C = $2.77 r = 6% (cont. comp. annual rate) (required precision 0.01 +/- 0.01)
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You have estimated spot rates as follows: r1 = 6.80%, r2 = 7.20%, r3 = 7.50%, r4 = 7.70%, r5 = 7.80%. a. What are the discount factors for each date (that is, the present value of $1 paid in year t)? (Do not round intermediate calculations. Round your answers to 3 decimal places.) b. Calculate the PV of the following $1,000 bonds assuming an annual coupon and maturity of : (i) 6.8%, two-year bond; (ii) 6.8%, five-year bond; and (iii) 11.8%, five-year bond. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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The following graph shows the contingency graph for purchasers of euro put options, with a premium of $0.06 and an exercise price of $1.38. NET PROFIT PER UNIT (Dollars per unit) 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 -0.01 -0.02 -0.03 -0.04 -0.05 -0.06 OD ← 1.3, 0 -0.07 + 1.22 1.24 1.26 1.28 1.30 1.32 1.34 1.36 1.38 1.40 FUTURE SPOT RATE (Dollars per euro) ? According to the graph, if the spot rate turns out to be $1.26, and the option is exercised, the buyer will According to the graph, break-even price is $0.04 $0.06 $0.01 $0.03 per unit.
Given the spot rates as s1 = 14%, s2=10%, s3=13%, s4=13%, and s5=16% calculate the following values rounded to 2 digits: Future rates f(1,3) = Blank, f(2,5) = Blank, the short rate r3 = Blank, and the discount factors d2 = Blank, and d(1,5) = Blank? %3D %3D %3D
am. 135.
Question 1: a) Calculate the two period binomial model put price for a stock price of 40$, strike price of 42$, r = 5%, u = 1.25 and d= .80 Check your answer using one period model values.
You purchase a call with a strike of K-22 at a premium of 1.73 and you purchase a put with a strike of K-22 at a premium of 2.13. At maturity, the underlying is worth 15.31. What is your profit (or loss)? {Enter your answer in dollars with 2 decimals, but do not use the "$". Enter a loss with a negative sign. For example, if the profit/loss is -123.45, enter-123.45 with the negative sign for your answer. }
D6) Finance What is the OAS on the MBS with the following characteristics: 1. Coupon rate: 9.5% 2. Current market price: 97.75 3. Forward rate at T=0, 1.95%, Forward rates at T=1 +/- 75bps from T=0 rate, Forward rates at T=2 6%, 4%, and 4% from top to bottom of the forward rate tree Submit your response in X.XXX% out to 3 decimals.
Let S = $100, K = $95, \sigma = 30%, r = 8% (continuously compounded), T = 1, and \delta = 0. Let u = 1.3, d=0.8, and n = 2. Construct the binomial tree for a European put option. At each node provide the premium, \Delta, and B.
Complete the table using the information provided and assume a VAT rate of 15%: VAT EXCLUSIVE PRICE VAT AMOUNT VAT INCLUSIVE PRICE R280 a b c d R862.50 e R126 f

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