Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 20, Problem 15PS
Put–call parity It is possible to buy three-month call options and three-month puts on stock Q. Both options have an exercise price of $60 and both are worth $10. If the interest rate is 5% a year, what is the stock price? (Hint: Use put–call parity.)
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You are considering purchasing a put on a stock with a current price of $33. The exercise price is $35, and the price of the corresponding call option is $3.25. According to the put-call parity theorem, if the risk-free rate of interest is 4% and there are 90 days until expiration, the value of the put should be:
Give typing answer with explanation and conclusion
A call option has a strike price of $11, and a time to expiration of 0.8 in years. If the stock is trading for $20, N(d1) = 0.5, N(d2) = 0.12, and the risk free rate is 5.40%, what is the value of the call option?
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Chapter 20 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 20 - Vocabulary Complete the following passage: A _____...Ch. 20 - Option payoffs Note Figure 20.13 below. Match each...Ch. 20 - Option combinations Suppose that you hold a share...Ch. 20 - Put-call parity What is put-call parity and why...Ch. 20 - Prob. 5PSCh. 20 - Option combinations Dr. Livingstone 1. Presume...Ch. 20 - Option combinations Suppose you buy a one-year...Ch. 20 - Prob. 8PSCh. 20 - Prob. 9PSCh. 20 - Option values How does the price of a call option...
Ch. 20 - Option values Respond to the following statements....Ch. 20 - Option combinations Discuss briefly the risks and...Ch. 20 - Option payoffs The buyer of the call and the...Ch. 20 - Option bounds Pintails stock price is currently...Ch. 20 - Putcall parity It is possible to buy three-month...Ch. 20 - Prob. 16PSCh. 20 - Option values FX Bank has succeeded in hiring ace...Ch. 20 - Option combinations Suppose that Mr. Colleoni...Ch. 20 - Put-call parity A European call and put option...Ch. 20 - Putcall parity a. If you cant sell a share short,...Ch. 20 - Putcall parity The common stock of Triangular File...Ch. 20 - Prob. 23PSCh. 20 - Option combinations Option traders often refer to...Ch. 20 - Option values Is it more valuable to own an option...Ch. 20 - Option values Table 20.4 lists some prices of...Ch. 20 - Option values Youve just completed a month-long...Ch. 20 - Prob. 29PSCh. 20 - Prob. 30PS
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- Please answer the five questions below. You may attach a spreadsheet or enter the answers in this box 1. A one year call option has a strike price of 50, expires in 6 months, and has a price of $4.74. if the risk free rate is 3%, and the current stock price is $45, what should the corresponding put be worth?arrow_forwardThe current stock price of IBM is $64. A put option on IBM with an exercise price of $67 sells for $7 and expires in 1 month(s). If the risk-free rate is 1.1% per year, what is the price of a call option on IBM with the same exercise price and expiration date (keep two decimal places)?arrow_forwardAssume you want to price a call on a stock that has the price of $35 today. The option matures in one year and has the strike price of $34. Assume the stock price is equally likely to go up by 10% or down by 10% in one year, and you plan to use a one-step binomial tree to price the call option. What is the hedge ratio (in decimal format, use 5 decimal places)?arrow_forward
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