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a) What is the price of the option (rounded to the nearest cent)? Answer = $ b) What is the option's delta (rounded to four decimal places)? Answer= c) Use your answer from (b) to estimate the value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $

a) What is the price of the option (rounded to the nearest cent)? Answer = $ b) What is the option's delta (rounded to four decimal places)? Answer= c) Use your answer from (b) to estimate the value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $

Essentials Of Investments
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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A stock currently trades at $40, and the volatility of its return is 10%. The continuously compounded rate of interest is 12%. Consider a call option struck at $45, with 75 days to expiration (recall that there are 251 trading days in one year). a) What is the price of the option (rounded to the nearest cent)? Answer = $ . b) What is the option's delta (rounded to four decimal places)? Answer = . c) Use your answer from (b) to estimate the value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ . d) What is the exact value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ . [Note: Use software to compute the values of the normal CDF, not the table.]

 

WebWork 6: Problem 10 Previous Problem Problem List Next Problem A stock currently trades at $40, and the volatility of its return is 10%. The continuously compounded rate of interest is 12%. Consider a call option struck at $45, with 75 days to expiration (recall that there are 251 trading days in one year). a) What is the price of the option (rounded to the nearest cent)? Answer -$ b) What is the option's delta (rounded to four decimal places)? Answer = c) Use your answer from (b) to estimate the value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ d) What is the exact value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ [Note: Use software to compute the values of the normal CDF, not the table.]
Transcribed Image Text:WebWork 6: Problem 10 Previous Problem Problem List Next Problem A stock currently trades at $40, and the volatility of its return is 10%. The continuously compounded rate of interest is 12%. Consider a call option struck at $45, with 75 days to expiration (recall that there are 251 trading days in one year). a) What is the price of the option (rounded to the nearest cent)? Answer -$ b) What is the option's delta (rounded to four decimal places)? Answer = c) Use your answer from (b) to estimate the value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ d) What is the exact value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ [Note: Use software to compute the values of the normal CDF, not the table.]
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