АВС Вerhad: Current stock price Standard deviation :RM3.20 : 12% Call option specifications: Exercise price Time to expiration Contract size : RM3.10 : 3 months : 100 shares Interest rate : 3.5%
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A: The question is based on valuation of option by use of Black and Scholes model. Formula as:
Calculate the price of a call and a put option based on the Black-Scholes option pricing.
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- Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?Binomial Model The current price of a stock is 20. In 1 year, the price will be either 26 or 16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of 21 and that expires in 1 year. (Hint: Use daily compounding.)A non paying dividend stock's price is 51. Call option delta is 0.5. Stock volatility is 0.2.By using BS model, the premium of 9 months 56-strike priced European Call option is (Please keep four decimal places).
- 13. Assume Company AAA options have an exercise price of $45 and expire in 156 days. The current price of Company AAA stock is $44.375. The (annually compounded) risk-free rate is 7 percent per year and the standard deviation of Company AAA's stock returns is 0.31. Calculate d1 [Use the Black-Scholes formula].12. A non paying dividend stock is priced at 50. Call option delta is 0.5. Stock volatility is 0.29. By using BS model, the premium of 55-strike priced European call option in 6 months isUmberto Consulting Limited Convertible Bond Common Equity Par Value $1,000.00 Coupon (Annual Payment) 0.03 Current Market Price $975.00 $30.50 Straight Bond Value $935.00 Conversion Ratio 30 Conversion Option Any Time Dividend $1.00 Expected Market Price in One Year $38.25 Required: Using the information in the tables above, please calculate the current market conversion price and the following expected rates of return. Assume coupons are received before any conversion takes place. (Use cells A3 to C10 from the given information to complete this question.) Umberto Consulting Limited Market Conversion Price Expected Rate of Return, Convertible Bond Expected Return of Return, Common Equity
- Question content area top Part 1 (Preferred stock valuation) Pioneer's preferred stock is selling for $40 in the market and pays a $4.40 annual dividend. a. If the market's required yield is 9 percent, what is the value of the stock for that investor? b. Should the investor acquire the stock? Question content area bottom Part 1 a. The value of the stock for that investor is $enter your response here per share. (Round to the nearest cent.)(Valuing common Stock) Assume the following: • The investor’s required rate of return is 15 percent. • The expected level of earnings at the end of this year (E1) is $5.00. • The retention ratio is 50 percent. • The return on equity (ROE) is 20 percent (that is, it can earn 20 percent on reinvested earnings). • Similar shares of stock sell at multiples of 10 times earnings per share. a. Determine the price/earnings ratio (P/E1) b. What is the stock price using the P/E ratio valuation method? c. What is the stock price using the dividend discount model? d. What would happen to the P/E ratio (P/E1) and stock price if the firm could earn 25 percent on reinvested earnings (ROE)? e. What does this tell you about the relationship between the rate the firm can earn on reinvested earnings and the P/E ratio? 2. Jelaskan mengapa investor menganggap bahwa saha(Valuing common Stock) Assume the following: • The investor’s required rate of return is 15 percent. • The expected level of earnings at the end of this year (E1) is $5.00. • The retention ratio is 50 percent. • The return on equity (ROE) is 20 percent (that is, it can earn 20 percent on reinvested earnings). • Similar shares of stock sell at multiples of 10 times earnings per share. A. Determine the price/earnings ratio (P/E1) B. What is the stock price using the P/E ratio valuation method? C. What is the stock price using the dividend discount model? D. What would happen to the P/E ratio (P/E1) and stock price if the firm could earn 25 percent on reinvested earnings (ROE)? E. What does this tell you about the relationship between the rate the firm can earn on reinvested earnings and the P/E ratio?
- A.K. Scott’s stock is selling for $37 a share. A 3-month call on this stock with a strike price of $38 is priced at $2. Risk-free assets are currently returning 0.28 percent per month. a) What should be the price of a 3-month put option on this stock with a strike price of $38? b) Which of the two options is currently in the money and does that accord with your conclusions about their relative prices?Question content area top Part 1 (Preferred stock valuation) Pioneer's preferred stock is selling for $21 in the market and pays a $2.70 annual dividend. a. If the market's required yield is 11 percent, what is the value of the stock for that investor? b. Should the investor acquire the stock? Question content area bottom Part 1 a. The value of the stock for that investor is $enter your response here per share. (Round to the nearest cent.) Part 2 b. Should the investor acquire the stock? (Select from the drop-down menus.) The investor ▼ should should not acquire the stock because it is currently ▼ underpriced overpriced in the market.Question content area top Part 1 (Preferred stock valuation) Kendra Corporation's preferred shares are trading for $29 in the market and pay a $4.70 annual dividend. Assume that the market's required yield is 17 percent. a. What is the stock's value to you, the investor? b. Should you purchase the stock? Question content area bottom Part 1 a. The value of the stock to you, the investor, is $enter your response here per share. (Round to the nearest cent.)
