When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 6% per year with continuous compounding, the volatility is 30% and the time to maturity is 3 months which of the following is the price of a European call option on the stock? 19.7N(0.175)-20N(0.025) 19.7N(0.025)-20N(0.175) 20N(0.175)-19.7N(0.025) 20N(0.025)-19.7N(0.175)

When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 6% per year with continuous compounding, the volatility is 30% and the time to maturity is 3 months which of the following is the price of a European call option on the stock? 19.7N(0.175)-20N(0.025) 19.7N(0.025)-20N(0.175) 20N(0.175)-19.7N(0.025) 20N(0.025)-19.7N(0.175)

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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Suppose a non-dividend paying stock is trading at $175 per share and has a volatility of 20%. What is the fair price of a 3-month European call option with a strike price of $190 per share using 1 binomial period? Assume the risk-free rate is 1%. Round to the nearest $0.01.
The price of a stock, which pays no dividends, is $64 and the strike price of a one year European call option on the stock is $60. The risk-free rate is 3% (continuously compounded). What is the lower bound for the call option? A. $5.98 B. $5.77 C. $4.12 D. $2.17
The following 1-year European call options are available on the stock of Vega International, whose stock is trading at €72.50: Strike Price Call Price (€) (€) 60 8.00 75 3.00 90 2.00 What is the maximum profit realised at maturity from a long butterfly spread created from these call options? Assume a risk-free rate of 5%.
The strike price of a European put option is $30, the current price of the underlying stock is $24, the risk-free nominal rate of return is 6% and every six months the stock can either increase by a factor of 1.6 or decrease by a factor of 0.5. If the probability of the stock decreasing every six months ( nd) is 0.75, calculate the price of the put option if it is priced under the Binomial Method and expires in one year. I
A stock price is currently 40 and has a volatility of 25% and a dividend yield of 2%. the risk-free rate is 7%. what is the value of a european six-month put option with a strike price of 42 using a two-step tree? a. $3.15 b. $3.39 c. $3.67 d. $3.86
The price of a European call option on a stock with a strike price of $50.9 is $5.6. The stock price is $40.1, the continuously compounded risk-free rate (all maturities) is 5.2% and the time to maturity is one year. A dividend of $0.6 is expected in six months. What is the price of a one-year European put option on the stock with a strike price equal to the call's strike price? Please state the formula and steps, thanks
Consider a two - period binomial model, where each period is 6 months. Assume the stock price is $75.00, \sigma 0.35, and r = 0.05. An American call option with a strike price of $80 would be exercised early at what dividend yield? () (A) 5.0% (B) 7.0 % (C) 9.0% (D) Never exercise early
What is the value of d, of a European call option on a non-dividend-paying stock when the stock price is $60, the strike price is $59, the risk-free interest rate is 5% per annum the volatility (Standard Deviation) is 30% per annum, and the time to maturity is three months? c=SN(d,)-Ke-N(₂) where and O√T OA02704 OB0.2167 *√T OC.0.3561 OD.0.1204
b. What is a lower bound for the price of a nine-month European put option on a non-dividendpaying stock when the stock price is $65, the strike price is $69, and the risk-free interest rate is5% per annum? c. What is a lower bound for the price of a nine-month European call option on a non-dividendpaying stock when the stock price is $75, the strike price is $70, and the risk-free interest rate is8% per annum?
You observe that a non-dividend paying stock currently trades for ₺150 on Borsa Istanbul. The annual standard deviation of its returns is expected to be 41% per year over the next year and the continuously compounded risk-free rate of interest is flat at 18% per year over all investment horizons. Compute the theoretical price of a European call option with a strike price of ₺200 and five months remaining until expiration written on a single share of this stock using to the Black-Scholes option pricing model
A two-year European call option is written on a stock whose current price is $20. The stock will pay a dividend of $1 three months from now and another $1 one and half years from now. The strike price is $18, and the riskfree interest rate is 5%. Then the tightest lower bound for the call option value is, 6. $1.8976 $1.535 $1.194 a. b. с. d. $1.7976. Six-month call options with strike prices of $25 and $30 cost $4 and $3 respectively. Then the maximum possible gain and loss from a bear spread 7. formed using the two calls are respectively $10 and infinity $10 and $10 $1 and $4 $4 and $1 $10 and $5 а. b. c. d. е. Twelve-month European put options with strike prices of $35, $30, and $25 cost $7, $3.5, and $2 respectively. Then the maximum possible gain and loss from a butterfly spread formed using the three puts are respectively 8. a. $4.5 and infinity b. $4.5 and $0.5 $0.5 and $4.5 $3 and $0.5 $10 and $4.5 c. d. е. 9. A three-month call with a strike price of $20 costs $1. A three-month…
Suppose that an American put option with a strike price of $70.0 and maturity of 4.0 months costs $13.2. The underlying stock price equals 55. The continuously compounded risk-free rate is 8.5 percent per year. What is the potential arbitrage profit from buying a put option on one share of stock? 1.9783 no arbitrage profit available 3.8117 4.2693 1.80

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