Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 21, Problem 11P
Roslin Robotics stock has a volatility of 30% and a current stock price of $60 per share. Roslin pays no dividends. The risk-free interest is 5%. Determine the Black-Scholes value of a one-year, at-the-money call option on Roslin stock.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Roslin Robotics stock has a volatility of
28%
and a current stock price of
$72
per share. Roslin pays no dividends. The risk-free interest is
5%.
Determine the Black-Scholes value of a one-year, at-the-money call option on Roslin stock.
The Black-Scholes value of a one-year, at-the-money call option on Roslin stock is
$ Enter your response here.
(Round to the nearest cent.)
Roslin Robotics stock has a volatility of 31% and a current stock price of $62 per share. Roslin pays no dividends. The risk-free interest is 5%. Determine the Black-Scholes value of a one-year, at-the-money call option on Roslin stock.
The Black-Scholes value of a one-year, at-the-money call option on Roslin stock is $
(Round to the nearest cent.)
Roslin Robotics stock has a volatility of 27% and a current stock price of $64 per share. Roslin pays no dividends. The risk-free interest is 4%. Determine the Black-Scholes value of a one-year, at-the-money call option on Roslin stock.
The Black-Scholes value of a one-year, at-the-money call option on Roslin stock is $
(Round to the nearest cent.)
Chapter 21 Solutions
Corporate Finance
Ch. 21.1 - What is the key assumption of the binomial option...Ch. 21.1 - Why dont we need to know the probabilities of the...Ch. 21.1 - Prob. 3CCCh. 21.2 - What are the inputs of the Black-Scholes option...Ch. 21.2 - What is the implied volatility of a stock?Ch. 21.2 - How does the delta of a call option change as the...Ch. 21.3 - What are risk-neutral probabilities? How can they...Ch. 21.3 - Does the binominal model or Black-Scholes model...Ch. 21.4 - Is the beta of a call greater or smaller than the...Ch. 21.4 - What is the leverage ratio of a call?
Ch. 21.5 - Prob. 1CCCh. 21.5 - The fact that equity is a call option on the firms...Ch. 21 - The current price of Estelle Corporation stock is...Ch. 21 - Using the information in Problem 1, use the...Ch. 21 - Suppose the option in Example 21.11 actually sold...Ch. 21 - Eagletrons current stock price is 10. Suppose that...Ch. 21 - What is the highest possible value for the delta...Ch. 21 - Hema Corp. is an all equity firm with a current...Ch. 21 - Consider the setting of Problem 9. Suppose that in...Ch. 21 - Roslin Robotics stock has a volatility of 30% and...Ch. 21 - Rebecca is interested in purchasing a European...Ch. 21 - Using the data in Table 21.1, compare the price on...Ch. 21 - Consider again the at-the-money call option on...Ch. 21 - Harbin Manufacturing has 10 million shares...Ch. 21 - Using the information on Harbin Manufacturing in...Ch. 21 - Using the information in Problem 1, calculate the...Ch. 21 - Prob. 23PCh. 21 - Prob. 24PCh. 21 - Calculate the beta of the January 2010 9 call...Ch. 21 - Consider the March 2010 5 put option on JetBlue...
Additional Business Textbook Solutions
Find more solutions based on key concepts
The executive vice-president in charge of finance believes the price will not fall in proportion to the size of...
Foundations of Finance (9th Edition) (Pearson Series in Finance)
Coefficient of variation. Introduction: Risk: The risk can be defined as the uncertainty attached to an event s...
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
To calculate the current WACC. Introduction: The weighted average cost of capital is defined as the expected av...
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
What is a beta? How is it used to calculate r, the investor’s required rate of return?
Foundations Of Finance
1-1. Define marketing and outline the steps in the marketing process. (AASCB: Communication)
Marketing: An Introduction (12th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Taggart Transcontinental's stock has a volatility of 25% and a current stock price of $40 per share.Taggart pays no dividends. The risk-free interest rate is 4%. Calculate the Black-Scholes value of a one-year, at-the-money put option on Taggart stock.arrow_forwardSuppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot diagrams for a forward contract on XYZ stock with a forward price of $55. (b) Is there any advantage to investing in the stock or the forward contract? Why? (c) Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?arrow_forwardHoneywell does not pay a dividend and its stock has a volatility of 28% and a current stock price of $67 per share. The risk-free interest is 4%. Determine the Black-Scholes value of a one-year, at-the-money call option on Honeywell's stock. (You must show me how you do this without an Excel-based option pricing model. That is, you must show your work with the formulas and Z-Tables. The value will likely be different than if you just plug into an Excel-based BSOPM). The call option's value is $. (Round to the nearest cent.)arrow_forward
- Brighton Memory’s stock is currently trading at $50 a share. A calloption on the stock with a $35 strike price currently sells for $21.What is the exercise value of the call option? ($15.00) What is thetime value? ($6.00)arrow_forwardA call option on Jupiter Motors stock with an exercise price of $40 and one-year expiration is selling at $2. A put option on Jupiter stock with an exercise price of $40 and one-year expiration is selling at $1.5. If the risk-free rate is 9% and Jupiter pays no dividends, what should the stock price be? Assume there is no dividends. (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forwardZinc Company is currently trading for $30 per share. The stock pays no dividends. You are interested in valuing a one-year at-the-money European put option on Zinc stock. Assume that the volatility of Zinc stock is 40% per year and its beta is 0.95. The risk-free interest rate is 6%. (a) What is the intrinsic value of the put option? What is the time value of the put option? Interpret these two values. (b) You would like to replicate this put option using a portfolio of stocks and bonds. What portfolio would you hold? (c) What is the leverage ratio of the put option? What is the beta of the put option? Based on your answers, discuss why investors may want to include put options in their portfolios. (d) If you hold an American put option, would it ever be optimal to exercise it early? If so, under what circumstance?arrow_forward
- The current price of a non-dividend-paying stock is $56. Over the next six months it is expected to rise to $65 or fall to $52. Assume the risk-free rate is 5%. An investor sells call options with a strike price of $58. What is the value of each call option? O $3.37 O $2.85 O $3.11 O $2.76arrow_forwardThe common stock of Triangular File Company is selling at $91. A 13-week call option written on Triangular File's stock is selling for $9. The call's exercise price is $101. The risk-free interest rate is 8% per year. a. Suppose that puts on Triangular stock are not traded, but you want to buy one. Which combination will produce the same results? Buy call, invest PV(EX), sell stock short Sell call, invest PV(EX), sell stock short Buy call, lend PV(EX), buy stock Sell call, lend PV(EX), buy stock b. Suppose that puts are traded. What should a 13-week put with an exercise price of $101 sell for? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Put option pricearrow_forwardAn institutional investor holds several European call options on a non-dividend-paying stock with a strike of $55. The current stock price is $65, while the continuously compounded risk-free rate is 2% p.a and volatility is 25%. Assuming that the market follows the assumptions of the Black-Scholes option model: (i) Calculate the price of a one-year call option on the stock. (ii) Calculate the price of a one-year put on the same stock with the same strike price.arrow_forward
- You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $108 at year-end. XYZ currently sells for $108. Over the next year, the stock price will increase by 12% or decrease by 12%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. Suppose the desired put option were traded. How much would it cost to purchase? b. What would have been the cost of the protective put portfolio? c. What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with X=108? Show that the payoff to this portfolio and the cost of establishing the portfolio match those of the desired protective put. Complete this question by entering your answers in the tabs below. Required A Required B Required C Suppose the desired put option were traded. How much would it cost to purchase? Note: Do not round intermediate calculations. Round your…arrow_forwardXYZ stock has a current market price of $47.60 a share. the one-year call on XYZ stock with a strike price of $45 is priced at $3.20 whole the one-year put with a strike price of $45 is priced at $0.15. What is the risk-free rate of return?arrow_forwardYou would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $102 at year-end. XYZ currently sells for $102. Over the next year, the stock price will increase by 7% or decrease by 7%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. Suppose the desired put option were traded. How much would it cost to purchase? b. What would have been the cost of the protective put portfolio? c. What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with X=102? Show that the payoff to this portfolio and the cost of establishing the portfolio match those of the desired protective put. Complete this question by entering your answers in the tabs below. Required A Required B Required C What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education
Accounting for Derivatives Comprehensive Guide; Author: WallStreetMojo;https://www.youtube.com/watch?v=9D-0LoM4dy4;License: Standard YouTube License, CC-BY
Option Trading Basics-Simplest Explanation; Author: Sky View Trading;https://www.youtube.com/watch?v=joJ8mbwuYW8;License: Standard YouTube License, CC-BY