Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 20, Problem 3P
Below is an option quote on IBM from the CBOE Web site showing options expiring in October and November 2015.
- a. Which option contract had the most trades on that day?
- b. Which option contract is being held the most overall?
- c. Suppose you purchase one option with symbol IBM 1516J150. How much will you need to pay your broker for the option (ignoring commissions)?
- d. Explain why the last sale price is not always between the bid and ask prices.
- e. Suppose you sell one option with symbol IBM1516V 150. How much will you receive for the option (ignoring commissions)?
- f. The calls with which strike prices are currently in-the-money? Which puts are in-the money?
- g. What is the difference between the option with symboiiBM1 516J140 and the option with symbol IBM1506K140?
- h. On what date does the option with symbol IBM1516V140 expire? In what range must IBM’s stock price be at expiration for this option to be valuable?
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Here is some price information on Fincorp stock. Suppose that Fincorp trades in a dealer market. Bid Ask 36.33 36.68 Required: Suppose you have submitted an order to your broker to buy at market. At what price will your trade be executed? Suppose you have submitted an order to sell at market. At what price will your trade be executed? Suppose you have submitted a limit order to sell at $36.76.What will happen? Suppose you have submitted a limit order to buy at $36.61. What will happen?
which one is corect please confirm?
Q8:
An option that gives the owner the right to sell a financial instrument at the exercise price within a specified period of time is a
put option
call option
swap
premium
Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $80.
Option
Expiration
Strike Price
Calls
Puts
Volume
Last
Volume
Last
RWJ
March
72
250
5.20
180
5.30
April
72
190
11.05
147
10.05
July
72
159
11.90
63
13.85
October
72
80
12.80
31
12.45
a-1.
Are the call options in or out of the money?
multiple choice 1
In the money
Out of the money
a-2.
What is the intrinsic value of an RWJ Corporation call option?
b-1.
Are the put options in or out of the money?
multiple choice 2
In the money
Out of the money
b-2.
What is the intrinsic value of an RWJ Corporation put option?
c-1.
Two of the options are clearly mispriced. Which ones? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to…
Chapter 20 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
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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