Use the following quotes for Target stock options:TickerBidTGT 3/18/22 C200 20.15TGT 3/18/22 C210 13.45TGT 3/18/22 C2208.35TGT 3/18/22 C2304.85TGT 3/18/22 C240 2.70TickerTGT 3/18/22 P200TGT 3/18/22 P210TGT 3/18/22 P220TGT 3/18/22 P230TGT 3/18/22 P240Source: Bloomberg Finance L.P.Bid5.00Ask5.158.30 8.5012.85 13.4519.15 19.8026.05 27.80Ask21.6013.808.655.152.95CallsIVMLast29.00y 35.0714.25 32.589.65 31.345.10 31.072.85 31.08Return on investment at $205Return on investment at $255PutsLastIVM34.1632.3512.55 31.3418.49 30.0625.83 28.444.958.35Volume16203516Assume you purchased the right to sell 2,000 shares of Target stock in March 2022 at a strike price of $230 per share. SupposeTarget stock sells for $205 per share immediately before your options' expiration. What is the rate of return on your investment? Whatis your rate of return if the stock sells for $255 per share (think about it)? Assume your holding period for this investment is exactlythree months.%%Volume1838695Note: A negaive value should be indicated by a minus sign. Do not round intermediate calculations. Enter your 3-month returns asa percent rounded to 2 decimal places.

Here,StrikePrice of Put is $230Premium on Put at $230 is $19.80Number of Shares is 2,000

Use the following quotes for Target stock options: Ticker Bid TGT 3/18/22 C200 20.15 TGT 3/18/22 C210 13.45 TGT 3/18/22 C220 TGT 3/18/22 C230 TGT 3/18/22 C240 8.35 4.85 2.70 Ask 21.60 13.80 8.65 5.15 2.95 Calls Last IVM 29.00y 35.07 14.25 32.58 9.65 31.34 5.10 31.07 2.85 31.08 Puts Ticker Bid Ask TGT 3/18/22 P200 5.00 5.15 TGT 3/18/22 P210 8.30 8.50 TGT 3/18/22 P220 12.85 13.45 TGT 3/18/22 P230 19.15 18.49 19.80 26.05 27.80 25.83 28.44 TGT 3/18/22 P240 Source: Bloomberg Finance L.P. Return on investment at $205 Return on investment at $255 Last 4.95 8.35 12.55 IVM 34.16 32.35 31.34 30.06 Volume 6056 % % 16 20 35 16 Volume 18 38 6 Assume you purchased the right to sell 2,000 shares of Target stock in March 2022 at a strike price of $230 per share. Suppose Target stock sells for $205 per share immediately before your options' expiration. What is the rate of return on your investment? What is your rate of return if the stock sells for $255 per share (think about it)? Assume your holding period for this investment is exactly three months. 9 5 Note: A negaive value should be indicated by a minus sign. Do not round intermediate calculations. Enter your 3-month returns as a percent rounded to 2 decimal places.

Use the following quotes for Target stock options: Ticker Bid TGT 3/18/22 C200 20.15 TGT 3/18/22 C210 13.45 TGT 3/18/22 C220 TGT 3/18/22 C230 TGT 3/18/22 C240 8.35 4.85 2.70 Ask 21.60 13.80 8.65 5.15 2.95 Calls Last IVM 29.00y 35.07 14.25 32.58 9.65 31.34 5.10 31.07 2.85 31.08 Puts Ticker Bid Ask TGT 3/18/22 P200 5.00 5.15 TGT 3/18/22 P210 8.30 8.50 TGT 3/18/22 P220 12.85 13.45 TGT 3/18/22 P230 19.15 18.49 19.80 26.05 27.80 25.83 28.44 TGT 3/18/22 P240 Source: Bloomberg Finance L.P. Return on investment at $205 Return on investment at $255 Last 4.95 8.35 12.55 IVM 34.16 32.35 31.34 30.06 Volume 6056 % % 16 20 35 16 Volume 18 38 6 Assume you purchased the right to sell 2,000 shares of Target stock in March 2022 at a strike price of $230 per share. Suppose Target stock sells for $205 per share immediately before your options' expiration. What is the rate of return on your investment? What is your rate of return if the stock sells for $255 per share (think about it)? Assume your holding period for this investment is exactly three months. 9 5 Note: A negaive value should be indicated by a minus sign. Do not round intermediate calculations. Enter your 3-month returns as a percent rounded to 2 decimal places.

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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38. Suppose a stock is currently trading at $50. The risk-free rate is 2%. Consider the following two ending states for a one-period binomial option pricing model State Up Stock price 60 Down 40 What is the value of a call option with a strike price of 45? *a. $8.08 b. $5.17 c. $14.71 d. $7.35 e. $9.36 Factor Increase/Decrease .2 .2
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)?
Consider the following options on stock X: Option Delta Gamma Vega A 0.5 2.2 1.8 В 0.8 0.6 0.2 C -0.40 1.3 0.7 D 0.70 1.8 1.4 A bank is long 1000 units of Option A, short 200 units of Option B, short 2000 units of Option C, and short 500 units of Option D. The following two options are also available in the market: Option Delta Gamma Vega E 0.6 1.5 0.8 F 0.1 0.5 0.6 a) Design one strategy that would make the bank's portfolio delta neutral. b) Design one strategy that would make the bank's portfolio delta and gamma neutral. Explain why this strategy provides a better hedge with respect to changes in the price of stock X than the strategy you constructed in part (a). c) Design one strategy that would make the bank's portfolio delta, gamma, and vega neutral.
Assume that you have been given the following information on Purcell Corporation's call options: Inputs Intermediate Calculations Current stock price = $12 d1 = 0.32863 Time to maturity of option = 9 months d2 = 0.05477 Variance of stock return = 0.10 N(d1) = 0.62878 Strike price of option = $12 N(d2) = 0.52184 Risk-free rate = 7% According to the Black-Scholes option pricing model, what is the option's value? Do not round intermediate calculations. Round your answer to the nearest cent. Use only the values provided in the problem statement for your calculations. $
Basic Option Strategies Profit Computation Assume the below prices for calls and puts: Call Put Strike Jul Aug Oct Jul Aug Oct 165 2.7 5.25 8.1 2.4 4.75 6.75 170 0.8 3.25 6 5.75 7.5 1. Buy one August 170 call contract. Hold it until expiration. lIdentify the breakeven stock price at expiration. What is the profit/loss if ST=190? What is the maximum profit? 2. Buy one October 165 put contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185
Q6. We have the following order book for stock ABC. BID PRICE (QUOTE) 99.80 99.70 99.50 99.20 99.00 ASK PRICE (QUOTE) ASK OTY 16 24 BID QTY 100.20 20 299 100.30 100.40 100.60 100.90 175 233 500 400 500 a) At what average price will you be able to buy 100 stocks of ABC in you have put in a market order? b) What is the impact cost if calculated from the mid-quote price? c) What will be the last traded price shown by the exchange just after your trade has completed?
A4 answer the questions below
what can you say about the price movement of the stock? (AP)
Q2 - Returns on stocks X and Y are listed below: Period 1 2 3 4 5 6 7Stock X 4% -2% 5% -1% 10% 7% 12%Stock Y -3% 7% 4% 2% 2% 8% -3% Consider a portfolio of 10% stock X and 90% stock Y. What is the mean of portfolio returns? Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).
Tiempo restante U:28:23 What is the beta of a portfolio that has $18,400 in Stock M, $6,320 in Stock N, $32,900 in Stock O and $11,850 in Stock P. Their Betas are .97, 1.04, 1.23, and .88, respectivley? O a. 1.04 O b. 1.11 О с. 1.08 O d. 1.15 O e. .99
5. A stock index is currently trading at 50.00. The annual index standard deviation is 20 percent. Paul Tripp, CFA, wants to value two-year index options using the binomial model. To correctly value the options, he needs the formulas in Exhibit 1. The annual risk-free interest rate is 6 percent. Assume no dividends are paid on any of the underlying securities in the index. Exhibit 1. e-D U = e = 1.2214 d==- π₂ where e 1.06184 U-D Where: U = up movement factor D = down movement factor T = probability of an upward price movement
14. There are three securities in the market whose return on market portfolio yield the following results : reg rfood rmrf Source SS df MS Number of obs 516 F (1, 514) 763.49 %3D Model 6355.67324 6355.67324 Prob > F 0.0000 Residual 4278.81044 514 8.32453393 R-squared 0.5976 %3D Adj R-squared 0.5969 Total 10634.4837 515 20.6494829 Root MSE 2.8852 rfood Coef. Std. Err. P>|t| [95% Conf. Interval] rmrf .7834176 .0283526 27.63 0.000 .7277164 .8391188 _cons .3391769 .1275602 2.66 0.008 .0885734 .5897804 i. reg rdur rmrf Source SS df MS Number of obs 516 %3D F (1, 514) 1458.52 %3D Model 12789.402 1 12789.402 Prob > F 0.0000 %3D 4507.13047 R-squared Adj R-squared Residual 514 8.76873633 0.7394 %3D 0.7389 Total 17296.5324 515 33.5854999 Root MSE 2.9612 rdur Coef. Std. Err. P>|t]| [95% Conf. Interval] rmrf 1.111316 .0290992 38.19 0.000 1.054148 1.168484 _cons .063612 .1309193 0.49 0.627 -.1935907 .3208148 ii. reg rcon rmrf Source SS df MS Number of obs 516 F (1, 514) 2096.01 Model 13866.0296 1…

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