You have purchased a put option on Pfizer common stock. The option has an exercise price of $45 and Pfizer's stock currently trades at $47. The option premium is $0.60 per contract. a. What is your net profit on the option if Pfizer's stock price does not change over the life of the option? b. What is your net profit on the option if Pfizer's stock price falls to $41 and you exercise the option? (For all requirements, negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) a. Net profit b. Net profit per share per share

You have purchased a put option on Pfizer common stock. The option has an exercise price of $45 and Pfizer's stock currently trades at $47. The option premium is $0.60 per contract. a. What is your net profit on the option if Pfizer's stock price does not change over the life of the option? b. What is your net profit on the option if Pfizer's stock price falls to $41 and you exercise the option? (For all requirements, negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) a. Net profit b. Net profit per share per share

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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Calculate the value of a European put option on Apple stock. You are given the following parameter values: • The stock pays no dividends. • The exercise price is $115. • The interest rate is 4%. • The current stock price is $115. • The time to maturity of the option on Apple is 3 months. • The value of a European call option with the same maturity and strike is equal to $12.15.
In follow an Ito process with >0, a stock is worth $80 today, if the price of an option that pays the holder $2 exactly the first time the stock price reaches $200, what is the price of an option? Show all calculation.
1. An investor buys a European put on a share of $4. The stock price is $45 and the strike price is $42. Fill the table and answer. Stock price (ST) in the market $30 $35 $40 $42 $45 $50 $55 Option value (Pay off) Premium Profit a) Under what circumstances does the investor make a profit? b) Under what circumstances will the option be exercised? c) What is the maximum profit an investor can make if he/she buys this put option?
Assume you were trying to decide when to stop or cease within an investment (which has been ongoing). On what criteria would be your decision? What data do you think you would need?
You are attempting to value a put option with an exercise price of $102 and one year to expiration. The underlying stock pays no dividends, its current price is $102, and you believe it has a 50% chance of increasing to $121 and a 50% chance of decreasing to $83. The risk-free rate of interest is 10%. Calculate the value of a put option with exercise price $102.
solve a,b,c and d please. round to nearest dollar
Assume a stock with an option with the information as follows. • Stock purchased price was $113.• Call option on the stock was purchased at $4. • Call option has strike price at $115.• the stock price is $117on expiration date Please explain the Call Options Payoff Diagrams below, why it plot like this (please explain step by step) . Thank you for your answering
Assume that your company is made up of two divisions. Division 1 comprises 40 percent of the company while Division 2 makes up 60 percent of the company. The levered beta for the company as a whole is equal to 1.20 and the company's debt/value ratio is 50 percent (you may assume that appropriate values for Division 1 and 2 are also 50 percent). If the risk-free rate is 3.0 percent, the market risk premium is 6.00 percent, the marginal tax rate is 40 percent, and the before-tax cost of debt is 8.00 percent then, as you can calculate, the WACC for the company is 7.50 percent. As you can also calculate, using the Hamada equations, the unlevered beta for the company as a whole is 0.75. Now assume that other "pure" companies equivalent to Division 2 have an average unlevered beta of 0.61. Using this proxy for Division 2's unlevered beta, you should be able to determine (back out) the unlevered beta for Division 1, re-lever both betas, calculate the corresponding cost of equity, and then…
Suppose you own a put option on Apple stock with a strike price of $150. Suppose it is the expiration date of the option and the current stock price of Apple is $75. What payoff will you receive from making an optimal exercise decision on your option? 1. -$75 2. $0 3. $75
Suppose you buy one SPX call option contract with a strike of 2200. At maturity, the S&P 500 index is at 2218. What is your net gain or loss if the premium you paid was $14? (Input the amount as a positive value.)
Covered Calls Please help me.
You purchase 20 call option contracts with a strike price of $110 and a premium of $1.85. Assume the stock price at expiration is $119.12. a. What is your dollar profit? (Do not round intermediate calculations.) Dollar profit S 14,540 b. What is your dollar profit if the stock price is $105.07? (A negative value should be indicated by a minus sign. Do not round intermediate calculations.) If the stock price is $105.07, the call is worthless so the dollar profit is $

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