You are attempting to value a call option with an exercise price of $108and one year to expiration. The underlying stock pays no dividends, itscurrent price is $108, and you believe it has a 50% chance of increasingto $136 and a 50% chance of decreasing to $80. The risk-free rate ofinterest is 10%. Calculate the call option's value using the two-statestock price model.Note: Do not round intermediate calculations. Round your finalanswer to 2 decimal places.> Answer is complete but not entirely correct.Value of the call option$12.73 x

To value the call option using the two-state stock price model, we can calculate the expected payoff…

Answered: You are attempting to value a call…

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 with an exercise price of $45 is currently selling for $5. The delta for the put is -0.4, and the stock is currently selling for $50. What is the elasticity of the put?
Please show step by step work (not in excel): What is the call option premium given the following information? What would happen to the call price if the company initiated and paid a dividend before the expiration of the option? What would happen to the call premium if the expiration of the option expanded beyond the current 9 months? Stock price $36.00 Strike price $30.00 Volatility 16% Dividend Yield 0.00 Time 0.75 Riskfree Rate 2.70%
Black-Scholes Model Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $28, (2) strike price is $34, (3) time to expiration is 6 months, (4) annualized risk-free rate is 6%, and (5) variance of stock return is 0.09. Do not round intermediate calculations. Round your answer to the nearest cent. $
You are attempting to value a put option with an exercise price of $108 and one year to expiration. The underlying stock pays no dividends, its current price is $108, and you believe it has a 50% chance of increasing to $130 and a 50% chance of decreasing to $86. The risk-free rate of interest is 10%. Calculate the value of a put option with exercise price $108. Note: 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 $ 107.50
You are attempting to value a call option with an exercise price of $107 and 1 year to expiration. The underlying stock pays no dividends, its current price is $107, and you believe it has a 50% chance of increasing to $123 and a 50% chance of decreasing to $91. The risk-free rate of interest is 12%. Calculate the call option's value using the two-state stock price model. (Do not round intermediate calculations and round your final answer to 2 decimal places. Omit the "$" sign in your response.) Call option's value 60
Black-Scholes Model Use the Black-Scholes model to find the price for a call option with the following inputs: (1) current stock price is $32, (2) strike price is $37, (3) time to expiration is 3 months, (4) annualized risk-free rate is 7%, and (5) variance of stock return is 0.16. Do not round intermediate calculations. Round your answer to the nearest cent.
1. What is the fair value for a two-year American put option with a strike price of $85 over a stock which is trading at $86.15 which has a volatility of 37% when the risk free rate is 1.75% using the two step binomial tree? a) What is the delta of this option? b) What is the probability of a down movement in this stock? c) What is the probability of an up movement in this stock? d) What is the proportional move up for this stock e) What is the proportional move down for this stock f) What would be the value of the call option with the same strike price?
a) Draw the payoff patterns of i) a long call position ii) a long put position. b) A stock is currently trading at $155. The volatility of the stock price is 20% per annum and the risk-free rate is 8% per annum. What is the Black-Sholes price of a one-year call option with a strike price equal to $160? Assume that the stock will pay no dividends.
A stock priced at $50 has two possible outcomes, either increases to $60 or decreases to $42. If the stock goes up, the payoff of the stock's call option = S5. But, if the stock price declines to $42, the calls will expire worthless. Given these two possible outcomes, what is the Hedge Ratio of the Call option? Round your answer to two decimals. The listed correct answer was 0.28. I could not find a way to get this.

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