Use the Black-Scholes formula for the following stock:Time to expiration.6 monthsStandard deviation56% per yearExercise price$55Stock price$55Annual interest rate6%Dividend0Recalculate the value of the call with the following changes:a. Time to expirationb. Standard deviationc. Exercise priced. Stock pricee.Interest rate3 months30% per year$63$639%Select each scenario independently.Note: Round your answers to 2 decimal places.a.b.C.d.نهValue of theCall Option

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Answered: Use the Black-Scholes formula for the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 17P

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Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price Annual interest rate Stock price Dividend 6 months 57% per year $44 $44 2% 0 Recalculate the value of the call with the following changes: a. Time to expiration b. Standard deviation c. Exercise price d. Stock price e. Interest rate 3 months 30% per year $49 $49 4% Select each scenario independently. Note: Round your answers to 2 decimal places. a. b. C. d. e. Value of the Call Option
Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price Stock price Annual interest rate Dividend 6 months 56% per year $55 $55 6% 0 Recalculate the value of the call with the following changes: a. Time to expiration b. Standard deviation c. Exercise price d. Stock price e. Interest rate 3 months 30% per year $63 $63 9% Select each scenario independently. Note: Round your answers to 2 decimal places. a. b. C. d. e. Value of the Call Option
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Historical Returns: Expected and Required Rates of Return You have observed the following returns over time: Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. % Year 2017 2018 2019 2020 2021 % Stock X 12% 17 -13 2 22 % Stock Y 15% 7 -4 3 12 Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. Market 13% 12 -10 2 15
1. Use the one-period valuation model P = E/(1 + k) + P1/(1 + k) to price the following stocks (remember to decimalize percentages). Earnings (E = $) 1.00 1.00 1.00 0 0 0 1.00 1.50 2.00 0 Required return (k = %) 10 15 20 5 5 5 10 10 10 10 Expected Price Next Year (P1 = $) 20 20 20 20 30 40 50 50 50 1 Answer: Price Today (P = $) 19.10 18.26 17.50 19.05 28.57 38.10 46.36 46.82 47.27 0.91
Consider the following information on a particular stock:Stock price = $88Exercise price = $84Risk-free rate = 5% per year, compounded continuouslyMaturity = 11 monthsStandard deviation =53% per year. What What is the delta of a call option?
The figure in the popup window, a. The expected return. b. The standard deviation of the return. Note: Make sure to round all intermediate calculations to at least five decimal places. Graph/chart Probability (%) 35- 30- 25- 20- 15 10- 5 shows the one-year return distribution for RCS stock. Calculate: -20% -10% 0% Return 10% 20% - Q Q G X
Consider the following information on a particular stock:Stock price = $88Exercise price = $84Risk-free rate = 5% per year, compounded continuouslyMaturity = 11 monthsStandard deviation =53% per year. What What is the delta of a put option?
Review the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?
REALIZED RATE OF RETURNS
You have observed the following returns over time: Year Stock X Stock Y Market 2017 14% 12% 13% 2018 21 7 8. 2019 -13 -7 -11 2020 2 3 2021 20 14 Assume that the risk-free rate is 6% and the market risk premium is 5%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: % Stock Y: % c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. %
Assume these are the stock market and Treasury bill returns for a 5-year period: Year 2016 2017 2018 2019 2020 Stock Market Return (%) 33.30 13.20 -3.50 14.50 23.80 Required: a. What was the risk premium on common stock in each year? b. What was the average risk premium? c. What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) 3 Required A Required B T-Bill Return Complete this question by entering your answers in the tabs below. Standard deviation (%) 0.12 0.12 0.12 0.07 0.09 x Answer is complete but not entirely correct. Required C What was the standard deviation of the risk premium? (Ignore that the estimation is from a sample of data.) Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. 13.69 X % घ

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