Peter has been granted options on 50,000 shares. The stock is currently trading at $17 a share and the options are at the money. The volatility of the stock returns averages 16 percent. The options mature in 2 years and the risk-free rate is 3.45 percent. N(d1) is .662055 and N(d2) is .576052. Given this information, what is the value of a call option on one share of this stock? $2.11 $1.70 $2.21 $1.89 $2.28
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Peter has been granted options on 50,000 shares. The stock is currently trading at $17 a share and the options are at the money. The volatility of the stock returns averages 16 percent. The options mature in 2 years and the risk-free rate is 3.45 percent. N(d1) is .662055 and N(d2) is .576052. Given this information, what is the value of a call option on one share of this stock?
$2.11
$1.70
$2.21
$1.89
$2.28
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- The stock of Suncor Energy is currently trading for $36 per share. An investor expects the stock price to move up in the next two months, and decided to invest $7, 200 in this stock. If the investor invests all the money in the stock, how much is the profit or loss if the stock price in two months turns out to be i) 40 or ii) 32? If the investor invests all the money in call options with a strike price of $35 and price of the call is $2 per share, how much is the profit or loss if the stock price in two months turns out to be i) 40 or ii) 32?An investor believes that the Cisco stock price is going to increase in the following 12 months from the current stock price of $200. Call options on Cisco stock expiring in 12 months have a strike price of $210 and sell at a premium of $20 each. The investor has $19,000 to invest, and is considering 3 alternatives: Purchase 950 call options. Purchase 95 shares. Invest $17,100 in a money market fund returning 8% per year and buy 95 call options with the remaining money. Assume that the stock price will be $237 per share after 12 months. What will be the investor's rate of return for alternative 2? What will be the investor's rate of return for alternative 3?Your company sold call options on a stock. The option expires in 6 months, the risk-free rate is 6%, and the strike price is $50. The stock is currently trading at $52 dollars and has a volatility of 35%. How many shares of stock should you own in your hedging portfolio per call option sold?
- An investor who wishes to purchase the stock belonging to Entity A to hold for two years will receive a dividend of $ 0.7 per share for the first year, $ 1.3 for the second year from this investment, and at the end of the second He estimates that it can be sold for $ 12.0 USD. What is the real value of the stock if the minimum rate of return expected by the investor is 20%? a) 15b) 2.81c) 9.81d) 21.81e) 5.81 ============= If the discount rate is 9%, what is the present value of 5375 USD received at the end of each year for 12 years?a) 25000,375b) 10000,5c) 12450,5d) 15500,375e) 38490,375 ============== The price / earnings ratio of the beta company stock has been calculated as 7.4. If the expected earnings per share of this stock for the next year is 2.5 USD, what is the real value of the stock? If the stock of this company is currently trading at 25 USD, can the relevant stock be purchased? a) 18.5 and should not be boughtb) 36 and must be purchasedc) 45 and must be purchased d) 18.5…Assume that the current stock price is $50 per share, that call options can be purchased with an exercise price of $60 per share, that bank loans can be obtained for a 10 percent nominal rate, and that at expiration of the option in three months, the stock will either be valued at $30 or $70. Show that it is possible to replicate the stock payoff by borrowing and buying a call option.Sam purchased Walsh stocks at $200 per share three month ago and did not receive anydividends so far. If his target is to earn a 20% APR on the investments, at what stock price couldhe sell the stock now? (Hint: what is the HPR for 3 months?)
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- A stock is expected to pay a dividend of $1 per share in 2 months. An investor purchased a forward contract on the stock at a forward price of $50 some time ago. The contract now has 3 months to its delivery date. The stock is currently trading at $55 and the risk free rate is 4% on a continuously compounded basis. Consider the following statements. I. The price of a forward contract on the stock with 3 months to the delivery date is $54.55 II. The value of the investor’s forward position is $5.50 Which of the following is correct? (No excel pls) a. Statement I is incorrect, Statement II is correct. b. Both statements are correct. c. Both statements are incorrect. d. Statement I is correct, Statement II is incorrect.Misuraca Enterprise’s current stock price is $45 per share. Call optionsfor this stock exist that permit the holder to purchase one share at an exercise price of $50.These options will expire at the end of 1 year, at which time Misuraca’s stock will be sellingat one of two prices, $35 or $55. The risk-free rate is 5.5%. As an assistant to the firm’streasurer, you have been asked to perform the following tasks to arrive at the value of thefirm’s call options.a. Find the range of values for the ending stock price and the call option at the option’sexpiration in 1 year.b. Equalize the range of payoffs for the stock and the option.c. Create a riskless hedged investment. What is the value of the portfolio in 1 year?d. What is the cost of the stock in the riskless portfolio?e. What is the present value of the riskless portfolio?f. From your answers in parts d and e, what is the value of the firm’s call option?The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $50per share for months, and you believe it is going to stay in that range for the next 3 months. Theprice of a 3-month put option with an exercise price of $50 is $4.a. If the risk-free interest rate is 10% per year, what must be the price of a 3-month call optionon C.A.L.L. stock at an exercise price of $50 if it is at the money? (The stock pays nodividends.)b. What would be a simple options strategy using a put and a call to exploit your convictionabout the stock price’s future movement? What is the most money you can make on thisposition? How far can the stock price move in either direction before you lose money?c. How can you create a position involving a put, a call, and riskless lending that would havethe same payoff structure as the stock at expiration? What is the net cost of establishing thatposition now?