EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202785
Author: DeMarzo
Publisher: VST
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Textbook Question
Chapter 20, Problem 17P
Dynamic Energy Systems stock is currently trading for $33 per share. The stock pays no dividends. A one-year European put option on Dynamic with a strike price of $35 is currently trading for $2.10. If the risk-free interest rate is 10% per year, what is the price of a one-year European call option on Dynamic with a strike price of $35?
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AAPL is currently trading for $95 per share. The stock pays no dividends. A one-year European put option on AAPL with a strike price of $90 is currently trading for $7.60. If the risk-free interest rate is 2% per year, then the price of a one-year European call option on AAPL with a strike price of $90 will be closest to:
Bank of America (BAC) is currently trading for $15 per share. The stock pays no dividends. A one-year European call option on BAC with a strike price of $16 is currently trading for $1.25. If the risk-free interest rate is 2% per year, then the price of a one-year European put option on BAC with a strike price of $16 will be closest to:
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A company’s stock currently sells for $81.16. A one-year European put option on that stock with strike price of $85 sells for $16.24, and the risk free interest rate is 1.6%. The market expects the company to pay dividends during that period, and the market consensus is that present value of those dividends is $5.26. The price of a one-year European call option on that stock with strike price of $85 is $_________.
(Note i: answer must be accurate to the nearest cent).
(Note ii. Use annual compounding NOT exponential compounding for the purpose of this question).
Chapter 20 Solutions
EBK CORPORATE FINANCE
Ch. 20.1 - What is the difference between an American option...Ch. 20.1 - Does the holder of an option have to exercise it?Ch. 20.1 - Prob. 3CCCh. 20.2 - What is a straddle?Ch. 20.2 - Explain how you can use put options to create...Ch. 20.3 - Explain put-call parity.Ch. 20.3 - If a put option trades at a higher price from the...Ch. 20.4 - What is the intrinsic value of an option?Ch. 20.4 - Can a European option with a later exercise date...Ch. 20.4 - How does the volatility of a stock affect the...
Ch. 20.5 - Is it ever optimal to exercise an American call on...Ch. 20.5 - When might it be optimal to exercise an American...Ch. 20.5 - Prob. 3CCCh. 20.6 - Explain how equity can be viewed as a call option...Ch. 20.6 - Explain how debt can be viewed as an option...Ch. 20 - Explain the meanings of the following financial...Ch. 20 - What is the difference between a European option...Ch. 20 - Below is an option quote on IBM from the CBOE Web...Ch. 20 - Prob. 4PCh. 20 - Prob. 5PCh. 20 - You own a call option on Intuit stock with a...Ch. 20 - Assume that you have shorted the call option in...Ch. 20 - You own a put option on Ford stock with a strike...Ch. 20 - Assume that you have shorted the put option in...Ch. 20 - What position has more downside exposure: a short...Ch. 20 - Consider the October 2015 IBM call and put options...Ch. 20 - You are long both a call and a put on the same...Ch. 20 - You are long two calls on the same share of stock...Ch. 20 - A forward contract is a contract to purchase an...Ch. 20 - You own a share of Costco stock. You are worried...Ch. 20 - Dynamic Energy Systems stock is currently trading...Ch. 20 - You happen to be checking the newspaper and notice...Ch. 20 - In mid-February 2016, European-style options on...Ch. 20 - Suppose Amazon stock is trading for 500 per share,...Ch. 20 - Consider the data for IBM options in Problem 3....Ch. 20 - You are watching the option quotes for your...Ch. 20 - Explain why an American call option on a...Ch. 20 - Consider an American put option on XAL stock with...Ch. 20 - The stock of Harford Inc. is about to pay a 0.30...Ch. 20 - Suppose the SP 500 is at 900, and a one-year...Ch. 20 - Suppose the SP 500 is at 900, and it will pay a...Ch. 20 - Prob. 29PCh. 20 - Suppose that in July 2009, Google were to issue 96...
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