Suppose you buy GM put for P3, which matures in two months with a strike price of P60. GM is currently trading at P62.75. If the stock price of GM falls to P57 on the expiration date of the option, the rate of return of your put is at what amount?
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Suppose you buy GM put for P3, which matures in two months with a strike price of P60. GM is currently trading at P62.75. If the stock price of GM falls to P57 on the expiration date of the option, the
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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.)Suppose that a stock price is currently 35 dollars, and it is known that four months from now, the price will be either 51 dollars or 29 dollars. Find the value of a European call option on the stock that expires four months from now, and has a strike price of 39 dollars. Assume that no arbitrage opportunities exist and a risk-free interest rate of 10 percent.Answer =dollars.
- Suppose that a stock price is currently 61 dollars, and it is known that at the end of each of the next two six-month periods, the price will be either 18 percent higher or 18 percent lower than at the beginning of the period. Find the value of a European put option on the stock that expires a year from now, and has a strike price of 64 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 10 percent.). Suppose the call option of Tesla company has an exercise price of $200 and expires in 90 days. Assume the current price of Tesla stock is $240, with a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. First, using the Black-Scholes formula, compute the price of the call. And then use put-call parity to compute the price of the put with the same strike and expiration date. Based on put-call parity, what should be the put option price? a. $ 2.65 b. $ 1.78 c. $ 3.69 d. $ 4.22 e. None of the aboveSuppose the call option of Tesla company has an exercise price of $200 and expires in 90 days. Assume the current price of Tesla stock is $240, with a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. First, using the Black-Scholes formula, compute the price of the call. And then use put-call parity to compute the price of the put with the same strike and expiration date. Based on put-call parity, what should be the put option price? $ 2.65 $ 1.78 $ 3.69 $ 4.22 None of the above
- Suppose that a stock price is currently 51 dollars, and it is known that one month from now, the price will be either 6 percent higher or 6 percent lower. Find the value of an American call option on the stock that expires one month from now, and has a strike price of 49 dollars. Assume that no arbitrage opportunities exist, and a risk free interest rate of 10 percentABC stock is currently trading at R70 per share. A dividend of R1 is expected after three monthsand another one of R1 after six months. A European call option on ABC stock has a strike priceof R65 and 8 months to maturity. Given that the risk-free rate is 10% and the volatility is 32%,compute the price of the option.Suppose that a stock price is currently 49 dollars, and it is known that one month from now, the price will be either 8 percent higher or 8 percent lower. Find the value of an American call option on the stock that expires one month from now, and has a strike price of 51 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 7 percent.
- Suppose that a stock price is currently 56 dollars, and it is known that five months from now, the price will be either 22 percent higher or 22 percent lower. Find the value of a European put option on the stock that expires five months from now, and has a strike price of 55 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 6 percent.Assume you own a call option on IBM stock with a strike price of $40. The option will expire in exactly six months time. If the stock is trading at $35 in six months, what will be the payoff of the call? Options for above is { $0.00 , $10,00 , $15.00 , $75.00 , $95.00 } Assume that you have shorted the call option described above, if the stock is trading at $55 in six months, what will you owe?Options for above is { $0.00 , $10.00 , $15.00 , $75.00 , $95.00 }If the stock is trading at $50 in six months, what will be the payoff of the call?Options for above is { $0.00 , $10.00 , $15.00 , $75.00 , $95.00 }Consider a 3-month European call option on a non-dividend-paying stock. The current stock price is $20, the risk-free rate is 6% per annum, and the strike price is $20. Assume a risk-neutral world. You calculate the following values using the Black-Scholes-Merton model: d1 = 0.2000 N(d1) = 0.5793 d2 = 0.1000 N(d2) = 0.5398 a) What is the probability that the call option will be exercised? b) What is the expected stock price at the option’s expiration in 3 months? Assume that all values of the stock price less than $20 are counted as zero. c) What is the expected payoff on the option at expiration (in 3 months)? d) Calculate the PV of the expected payoff from part c).
