Use the Black-Scholes model to find the value for a European put option that has an exercise price of $62.00 and four months to expiration. The underlying stock is selling for $62.50 currently and pays an annual dividend of $1.47. The standard deviation of the stock's returns is 0.14 and risk-free interest rate is 3.5%. (Round intermediary calculations to 4 decimal places. Round your final answer to 2 decimal places.) $ Put value

Use the Black-Scholes model to find the value for a European put option that has an exercise price of $62.00 and four months to expiration. The underlying stock is selling for $62.50 currently and pays an annual dividend of $1.47. The standard deviation of the stock's returns is 0.14 and risk-free interest rate is 3.5%. (Round intermediary calculations to 4 decimal places. Round your final 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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A put option that expires in six months with an exercise price of $65 sells for $4.45. The stock is currently priced at $61, and the risk-free rate is 3.9 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) X Answer is complete but not entirely correct. Call price $ 1.68 X
The price of a stock, which pays no dividends, is $30 and the strike price of a three-year European call option on the stock is $27. The risk-free rate is 8% (continuously compounded). Which of the following is a precise lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound? Round your answer to 2 decimal places. Question 12Answer a. $8.76 b. $8.42 c. $8.57 d. $8.70
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
The price of a stock, which pays no dividends, is $30 and the strike price of a two-year European call option on the stock is $25. The risk-free rate is 8% (continuously compounded). Which of the following is a precise lower bound for the option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound? Round your answer to 2 decimal places. a. $8.42 b. $8.76 c. $8.57 d. $8.70
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.
Use the binomial tree analysis to value a 6-month American put option with a $65 strike price on Crookshanks Corporation. The shares are currently trading for $60. The annualized continuously compounded risk-free rate is 3%. The volatility of the stock is 57%. You will use the Cox Ross Rubenstein method for computing the binomial tree, and use a time step of 2 months.
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
Use the Black-Scholes formula to find the value of the put option using the next data: Stock price: $5.03 Time to expiration: 176 days (365 days in a year) The volatility of a stock return: 65% per year Strike price: $5 Risk-free interest rate: 1% per year

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