You are going to write a 50-strike 1 year call option priced as $16 and enter 1 year long forward contract with $50 forward price. The continuous compounded risk free interest rate is 7%. If both positions have same profit, the stock price is in year 1.(please use 4 decimal numbers)

You are going to write a 50-strike 1 year call option priced as $16 and enter 1 year long forward contract with $50 forward price. The continuous compounded risk free interest rate is 7%. If both positions have same profit, the stock price is in year 1.(please use 4 decimal numbers)

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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Consider an American put option with time to expiry 15 months, and a strike of 74. The current price of the underlying is 71. Divide the time to expiry into three 5-months intervals. Assume that in each 5-months interval, the price can either rise by 5, or fall by 5, with unknown probability. The risk-free (continuously compounding) rate is 0.042. Using a binomial tree, identify the circumstances under which early exercise would be rational for the holder of this option. Draw the binomial tree and show the necessary calculation and briefly explain the answer.
Use Two-State Binomial Option (European) Pricing Model. Suppose you bought a stock today for $38.00. The stock price can either go up by a factor of 1.30 or down by a factor of 0.70 with equal probability in 0.50 years (or 180 days). Suppose the annual risk-free rate is 3.50% and the option exercise price is 35.00. How much should be the Call Option Value that expires in 0.50 years (or 180 days)?Enter your answer in the following format: 1.23Hint: The answer is between 6.74 and 9.38
A share of MSFT is currently selling for $54. A put option, with an exercise price of $30, sells for $3. If the options expire in one year and the borrowing rate is 6%, what must be the price of a call option with an exercise price of $30?
solve a,b,c and d please. round to nearest dollar
If you were to write a call option on XYZ (with a strike price of $100) AND also write a put option on XYZ (with a strike price of $100), each within six months maturity, what type of bet are you making? 1.XYZ will go up 2.XYZ will go down 3. Volatility of XYZ will increase 4. Volatility of XYZ will decrease
A power call option pays off (max(ST-X, 0))2 at time T, where ST is the stock price at time T and X is the exercise price. A stock price is currently $55. It is known that at the end of one year it will be either $60 or $50. The risk-free rate of interest with continuous compounding is 6% per annum. Calculate the value of a one year power call option with an exercise price of $54. a. What is the delta of the power call option? (sample answer: 1.55 or 0.55) b. What is the risk neutral probability of up movement? (sample answer: 55.50%) c. What is the value of the power option?
The current price of a stock is $34, and the annual risk - free rate is 3 %. A call option with a strike price of $32 and with 1 year until expiration has a current value of $5.54. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent. Please answer fast i give you upvote.
Suppose a one-year European put option on a stock has an exercise price of $30 and oneyear European call option on the same stock has the same exercise price of $30. The call is worth 3$ and the put is worth 2$. If the one-year interest rate is 1.5%, what is the price of the underlying stock, assuming no arbitrage opportunity?
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.) Call price
The current price of a stock is $18. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. $
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 Newgen Corp. stock will be either $94 or $103 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 7.90%. (Do not leave any empty spaces; input a O wherever it is required. Omit "$" sign in your response.) a. Suppose the current price of Newgen stock is $104. What is the value of the call option if the exercise price is $94 per share? (Round the final answer to 2 decimal places.) Call option value b. Suppose the exercise price is $109 in part (a). What is the value of the call option now? Call option value

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