Current market price of ABC stock is $77 ABC Stock price after 30 days =$80 ABC Stock price after 45 days =$95 ABC Stock price after 60 days =$80 ABC Stock price after 75 days =$85 ABC Stock price after 90 days =$70 Current price of European call on ABC stock with exercise price of $93 with 90 days to expiration =$2 Current price of European put on ABC stock with exercise price of $82 with 60 days to expiration =$6. Risk free rate is 5%. At t= 45, the minimum value of the put option is closest to A.$0 B.$13 C.$13.16

Current market price of ABC stock is $77 ABC Stock price after 30 days =$80 ABC Stock price after 45 days =$95 ABC Stock price after 60 days =$80 ABC Stock price after 75 days =$85 ABC Stock price after 90 days =$70 Current price of European call on ABC stock with exercise price of $93 with 90 days to expiration =$2 Current price of European put on ABC stock with exercise price of $82 with 60 days to expiration =$6. Risk free rate is 5%. At t= 45, the minimum value of the put option is closest to A.$0 B.$13 C.$13.16

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 1P

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Current market price of ABC stock is $77 ABC Stock price after 30 days =$80 ABC Stock price after 45 days =$95 ABC Stock price after 60 days =$80 ABC Stock price after 75 days =$85 ABC Stock price after 90 days =$70 Current price of European call on ABC stock with exercise price of $93 with 90 days to expiration =$2 Current price of European put on ABC stock with exercise price of $82 with 60 days to expiration =$6. Risk free rate is 5%. At t=45, the minimum value of the call option is closest to A.$2.56 B.$2 C.$0
Current market price of ABC stock is $77 ABC Stock price after 30 days =$80 ABC Stock price after 45 days =$95 ABC Stock price after 60 days =$80 ABC Stock price after 75 days =$85 ABC Stock price after 90 days =$70 Current price of European call on ABC stock with exercise price of $93 with 90 days to expiration =$2 Current price of European put on ABC stock with exercise price of $82 with 60 days to expiration =$6. Risk free rate is 5%. The price of the European call option with an exercise price of 82 and 30 days remaining expiration would be closest to A.$1.33 B.$4.90 C.$1.03
Both a call and a put currently are traded on stock XYZ; both have strike prices of $60 and expirations of 6 months.a. What will be the profit to an investor who buys the call for $5 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60. b. What will be the profit to an investor who buys the put for $7 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60
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Stock ABC is currently standing at £1,508. Consider the corresponding stock options that expire in 90 days. The current Treasury Bills have a risk-free annual rate 2 percent. On the market, the calls and puts listed for ABC have an exercise price of £1,550. (a) Assume there are no dividends paid for stock ABC. (i) Explain the payoff diagrams for the put & call options for both European options and American options. Explain whether an increase in volatility would have impacts on profits/payoffs diagrams of puts on stock ABC. If you are a hedger, why would you continue to buy such put options with increased uncertainty? Explain.
Consider a stock with current price S0 = 29 per share. A european call option on this stock that matures in T = 3 months with strike K = 30 costs PC = 2.9 per share. You are considering two ways to invest 58. Plan A is to buy 58 /29 = 2 shares of the stock and sell them in 3 months. Plan B is to buy 58 / 2.9 = 20 call options on the stock. If ST denotes the stock price per share in 3 months, plan B has higher payoff (a) for any ST > 0 (b) if ST < 29 (c) if 29 < ST < 30 (d) if ST > 30 (e) if ST > 33.33
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Suppose a non-dividend paying stock is trading at $175 per share and has a volatility of 45%. What is the fair price of a 9-month European put option with a strike price of $190 per share using 1 binomial period? Assume the risk-free rate is 1%. Round to the nearest $0.01.
The current stock price for XYZ ltd is sh. 85. A European call option with an exercise price of sh. 85 will expire in 160 days. The yield on a 160-day Treasury bill is 5.18%. The standard deviation of annual returns on XYZ’S stock is 445. Compute the premium for a call option on this stock using Black-Scholes model.
A stock is selling today for $110. The stock has an annual volatility of 64 percent and theannual risk-free rate is 7 percent.a. Calculate the fair price for a 1-year European call option with an exercise price of $95.b. Calculate how much the current stock price would need to change for the purchaser ofthe call option to break even in one year.c. Calculate the fair price for a 1 year European put option with an exercise price of $95
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