You are given the following information on some company's stock, as well as the risk- free asset. Use it to calculate the price of the call option written on that stock, as well as the price of the put option. (HINT: You should use the Black-Scholes formula!) (Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.) Today's stock = $72 price Exercise price = $70 Risk-free rate = Option maturity = 4 months Standard deviation of annual stock returns Call price Put price 4.3% per year, compounded continuously = 61% per year

You are given the following information on some company's stock, as well as the risk- free asset. Use it to calculate the price of the call option written on that stock, as well as the price of the put option. (HINT: You should use the Black-Scholes formula!) (Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.) Today's stock = $72 price Exercise price = $70 Risk-free rate = Option maturity = 4 months Standard deviation of annual stock returns Call price Put price 4.3% per year, compounded continuously = 61% per year

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 protective put is a strategy in which the losses are limited on the bearish side, and the profits are unlimited on the bullish side. Create an excel spreadsheet to keep track of your profit\loss at various stock prices Assume you have a portfolio of 100 shares and you were afraid that the price will go down, thus, you have purchased a June put option with exercise price X=125, Assume that the current stock price is 125.94.
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3 You are given the following information on some company's stock, as well as the risk- free asset. Use it to calculate the price of the call option written on that stock, as well as the price of the put option. (HINT: You should use the Black-Scholes formula!) (Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.) Today's stock - $77 price = Exercise price = $75 Risk-free rate = Option maturity = 5 months Standard deviation of annual stock returns Call price Put price $ $ 3.4% per year, compounded continuously = 59% per year 3.61 x 0.56 X 1
There are various ways to calculate the price of a call option using the Black-Scholes model. Below is a spreadsheet that breaks the required formulas into pieces to make it easy to work with. Column (1) shows the various inputs. The first five cells are the required inputs for a non-dividend paying stock. The remainder of the cells are the formula parts. Column (2) shows a solved problem for a stock selling for $50, with an exercise price of $45, an interest rate of 6 percent, 90 days (one-quarter of a year), and a standard deviation of .235. Column (3) shows how the cell values in Column (2) were calculated. Once you have this set up in the spreadsheet, you can calculate the price of any call option by substituting the correct values in the first five cells of column (2). Spreadsheet begins in row 2. Calculating a Call Price Using the Black-Scholes Model S 50 45 R 0.06 T 0.25 S 0.235 In(S/X) 0.105361 LN(B2/B3) r+0.50? 0.087613 B4+(,5)*(B6)^2 o(t)½ 0.1175 В6*((B5)^0.5) dl 1.083095…
You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset: a. Fill in the missing values in the table. (Leave no cells blank - be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Security Firm A Firm B Firm C The market portfolio The risk-free asset Expected return Expected Return * With the market portfolio Sell Buy 0.118 0.132 0.113 0.12 0.05 % Expected return Standard Deviation b-1. What is the expected return of Firm A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 0.23 0.74 0.74 0.23 0 % Correlation* 1.02 0.42 0.27 1 0 b-2. What is your investment recommendation regarding Firm A for someone with a well-diversified portfolio? b-3. What is the expected return of Firm B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2…
Use the Black-Scholes formula to find the value of a call option based on the following inputs. (Round your final answer to 2 decimal places. Do not round intermediate calculations.) Stock price Exercise price Interest rate Dividend yield Time to expiration Standard deviation of stock's returns Call value GA $ $ $ 48 60 0.07 0.04 0.50 0.26
Ningbo Industrial Concepts Incorporated Initial stock price $115.00 Exercise price $115.00 Call price $4.75 Put Price $4.50 Required: Using the information in the table above, please calculate dollar value of the following option strategies. Use this calculated dollar value to determine the profit of each strategy at various stock prices. (Use cells A3 to B6 from the given information to complete this question. Negative answer should be input and displayed as a negative value. All other answers should be input and displayed as positive values.) Ningbo Industrial Concepts Incorporated Dollar Value of Strategy as a Function of Current Stock Price Strategy $95.00 $105.00 $115.00 $125.00 $135.00 Straddle Strip Strap Ningbo Industrial Concepts Incorporated Rate of Return…
A call option on a stock trading at $58 has an exercise price of $47. The call option is _____ Check all that apply A. in the money B. out of the money C. at the money
Use the Black-Scholes formula to find the value of a call option based on the following inputs. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Stock price Exercise price Interest rate Dividend yield Time to expiration Standard deviation of stock's returns Call value $ 54 $ 63 0.082 0.04 0.50 0.260
Assume that if M launches a new e-trading platform, its price will go up to $261. Else, M price will go down to $62. You are aware that M shares are being traded at $162. You also know that the risk-free rate is 5%.What is the probability that M price will go down?***Please round your answer to the nearest three decimals (i.e. 0.512)
You are given the following information concerning the trades made on a particular stock. Calculate the money flow for the stock based on these trades. Note: Leave no cells blank - be certain to enter "O" wherever required. A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole number. Price $ 30.33 Volume 30.36 3,600 30.34 3,100 30.33 3,500 29.34 3,650 30.33 4,400 30.24 4,700 Price Up or Down Price Times Volume Positive Money Flow Negative Money Flow Net Money Flow $ 30.33 30.36 30.34 30.33 29.34 30.33 30.24 Money flow at the end of the day
Use the Black Scholes formulas and Excel (to avoid rounding errors in the final answers) to answer this question. Consider an option on a non-dividend-paying stock when the stock price is $44, the exercise price is $40, the risk-free interest rate is 6%, the volatility is 28% per annum, and the time to maturity is 4 months. (a) Find N(d1), enter answer to 3 decimal places. (b) Find N(d2),, enter answer to 3 decimal places. (c) What is the price of the option if it is a European call? Round answer to 3 decimal places. (d) What is the price of the option if it is a European put? Round answer to 3 decimal places.

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