Use the Black-Scholes formula to value the following options: a. A call option written on a stock selling for $78 per share with a $78 exercise price. The stock's standard deviation is 8% per month The option matures in three months. The risk-free interest rate is 1.75% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Call value b. A put option written on the same stock at the same time, with the same exercise price and expiration date. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Put value

Use the Black-Scholes formula to value the following options: a. A call option written on a stock selling for $78 per share with a $78 exercise price. The stock's standard deviation is 8% per month The option matures in three months. The risk-free interest rate is 1.75% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Call value b. A put option written on the same stock at the same time, with the same exercise price and expiration date. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Put 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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Use the Black–Scholes formula to value the following options:a. A call option written on a stock selling for $72 per share with a $72 exercise price. The stock's standard deviation is 6% per month. The option matures in three months. The risk-free interest rate is 1.50% per month. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. A put option written on the same stock at the same time, with the same exercise price and expiration date. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Please do not use excel, show work step by step, thank you
Suppose that you plan to invest in stock A, because you believe that stock A will appreciate in the next 6 months. The stock current price is $100, and a call option on stock A expiring in 6 months has an exercise price of $100 selling at $15 per option. And you have $7500 in hand to invest the following three strategies: A: Invest entirely in stock A. B: Invest entirely in call option on stock A. C: Buy call options the amount of calls is same as the number of shares we purchase in strategy A, and invest the remaining money in T-bills at interest rate whose annual interest rate is 10%. Suppose that the possible stock price are $90, $100, $110, and $120. (a) At expiration (after 6 months), compute the rates of return for each strategy given different possible stock prices. We don't consider the premium we’ve paid for holding call options in this case. (b) Given different stock price at expiration, which strategy would you like to choose? For example, if the stock price is $90, which…
Suppose that a stock price is currently 49 dollars, and it is known that one month from now, the price will be either 8 percent higher or 8 percent lower. Find the value of an American call option on the stock that expires one month from now, and has a strike price of 51 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 7 percent.
Consider a call option on one share of BP with a strike price of $70 and exercise time 1 quarter (3 months). Suppose the current stock price for BP is S(0) = $65 per share. Suppose further that A(0) = $100, A(1) = $102 and two possible prices for S(1) are S $74 with probability 0.5, S(1) = $66 with probability 0.5. Evaluate the expected returns E(Ks) and E(Kc) for the stock and the option.
A stock sells for $125. A call option on the stock has an exercise price of $110 and expires in 3 months. If the interest rate is 0.15 and the standard deviation of the stock’s return is 0.30. What would be the price of a put option on the same stock with an exercise price of $140 and the same time (3 months) until expiration? Show all workings. (See Appendix for the Cumulative Normal Distribution Table) b) Let the spot rate be Yen 100 / $ and the 3-month forward rate be Yen 99/$. Compute the interest rate differential between the U.S. and Japan at which interest rate parity will hold true.
Please do not provide answer in image formate, thank you.
Assume a stock price of $31.18, risk-free rate of 3.6 percent, standard deviation of 44 percent, N(₁) value of .62789, and an N(d₂) value of .54232. What is the value of a three-month call option with a strike price of $30 given the Black-Scholes option pricing model? Question 9 options: $3.38 $3.99 $3.68 $1.76 $3.45
You buy a share of stock, write a 1-year call option with X = $85, and buy a 1-year put option with X = $85. Your net outlay to establish the entire portfolio is $83.3. Required: What is the payoff of your portfolio? What must be the risk-free interest rate? The stock pays no dividends. Note: Round your answer to 2 decimal places.
Suppose the call option of Tesla company has an exercise price of $200 and expires in 90 days. Assume the current price of Tesla stock is $240, with a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. First, using the Black-Scholes formula, compute the price of the call. And then use put-call parity to compute the price of the put with the same strike and expiration date. Based on put-call parity, what should be the put option price? $ 2.65 $ 1.78 $ 3.69 $ 4.22 None of the above
2. What are the prices of a call option and a put option with the following characteristics? Stock price = $74Exercise price = $72Risk-free rate = 2.7% per year, compounded continuouslyMaturity = 4 monthsStandard deviation = 52% per year 3. Draw the payoff picture at expiration for a long position in a call option that has a premium of $1.25 and a strike price of $30. 4. Draw the payoff picture for a short position in the call option given in Problem 2.5. Draw the payoff picture at expiration for a long position in a put option that has a premium of $3.50 and a strike price of $80. 6. Draw the payoff picture for a short position in the put option given in Problem 4.please let me have it by mornin. Thank you.
What is the value of a put option if the underlying stock price is $47, the strike price is $40, the underlying stock volatility is 52 percent, and the risk-free rate is 5.5 percent? Assume the option has 150 days to expiration. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) X Answer is complete but not entirely correct. Value of a put option $ 7.00
A stock is currently selling for $39. In one period, the stock will move up by a factor of 1.29 or down by a factor of .53. A call option with a strike price of $50 is available. If the risk-free rate of interest is 2.5 percent for this period, what is the value of the call option?

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