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- Emmanuel holds a one-year call option on Shoprite common stock. The call option can be exercised at K15. Assume that the expiration date has arrived. What is the value of the Shoprite call option on the expiration date if:
- Shoprite common stock is selling at K20 per share?
- Shoprite common stock is selling at K10 per share?
- A trader buys a European put on a share for K3. The stock price is K42 and the strike price is K40.
- State the circumstances under which the trader will make a profit.
- State the circumstances under which the option will be exercised.
- Draw a diagram in support of your answers above, showing the variation of the trader’s profit with the stock price at the maturity of the option.
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- Tembo holds a one-year put option on Shoprite common stock. The put option can be exercised at K50. Assume that the expiration date has arrived and the premium is K3. What is the value of the Shoprite put option on the expiration date if: Shoprite common stock is selling at K56 per share? Shoprite common stock is selling at K45 per share?a) Tembo holds a one-year put option on Shoprite common stock. The put option canbe exercised at K50. Assume that the expiration date has arrived and the premium isK3. What is the value of the Shoprite put option on the expiration date if:Shoprite common stock is selling at K56 per share?Ms. Co currently own a put option on Stock A with a strike price of P45. If the current price of Stock A is P40, then what is the in-the-money amount of the option?
- An investor sells a European Put on a share for $4. The stock price is $47 and the strike price is $50. Under what circumstances does the investor make a profit? Under what circumstances will the option be exercised? Draw a diagram showing the variation of the investor's profit with the stock price at the maturity of the option.AAPL is currently trading for $95 per share. The stock pays no dividends. A one-year European put option on AAPL with a strike price of $90 is currently trading for $7.60. If the risk-free interest rate is 2% per year, then the price of a one-year European call option on AAPL with a strike price of $90 will be closest to:Nanno Company offers its investors option contracts to buy their shares at a price of P50. Currently, the value of their stocks in the market stands at P60. The 52-week high of the share price is P83 and its 52-week low is P47. The treasury bill issued by the government yields 8.25% currently. REQUIRED: What’s the probability for the up move? What’s the probability for the down move? How much is the total option pay off for the stock? What should be the reasonable price of the option contracts of the company?
- Pellegrino Capital owns a call option which gives it the right to purchase shares in Apple at a price of $100 a share. Apple stock is trading in the market at $105. Pellegrino would like to profit today from this situation but is not permitted to exercise the option for another two weeks. Which of the following statements apply to this situation? i) Pellegrino must own a European call option.ii) Pellegrino must own an American call option.iii) Pellegrino should sell the option today if it feels the price of the stock will decline significantly over the next two weeks.iv) Pellegrino cannot profit today from a marked increase in volatility in the shares.Melbourne Capital Ltd considers selling European call options on ANZ Bank Ltd for $1.50 per option. The current market price is $17.70 on 28th September 2020, the exercise price is $20, and the maturity of each call option is 6 months. Under what circumstances does the investor make a profit? Under what circumstances will the option be exercised? How many call options should the investor sell to raise a total capital of $1,260,000? Company A agrees to enter into an FRA agreement with Company B in which Company A borrows $ 40,000,000 in 6-month time for a period of 9 months, and Company B invests $ 40,000,000 in 6-month time for a period of 9 months. The 6-month interest rate is 0.77% per annum and the 9-month interest rate is 0.89% per annum. What is the interest rate that both companies agreed upon? Suppose that at the expiry date of the FRA, the 6-month interest rate is 0.81% per annum and the 9-month interest rate is 0.96% per annum, calculate the…A 6-month European put option on a stock with a strike price $63 is selling for $2, the current stock price is $65, and the stock will pay a dividend of $0.51 in 3 months. The 3-month risk-free rate is 8% per annum with quarterly compounding, and the 6-month risk-free rate is 10% per annum with semiannual compounding. What is the price of a 6-month European call option on the stock with the same strike price?
- You are an options dealer who deals in non-publicly traded options. One of your clients wants to purchase a one-year European call option on Alpha Computer Systems stock with a strike price of $20. Another dealer is willing to write a one-year European put option on Alpha Computer stock with a strike price of $20, and sell you the put option for a price of $4.00 per share. If Alpha Computer pays no dividends and is currently trading for $18 per share, and if the risk-free interest rate is 6%, what is the lowest price you can charge for the call option and still guarantee yourself a profit? $2.50 $1.632 $18.00 $4.13 None of the above.What is the price of a European put option on a non-dividend paying stock when thestock price is K69, the strike price is K70, the risk-free rate is 5% per annum, thevolatility is 35% per annum, and the time to maturity is 6 months?Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $99.00 and expires in 85 days. The current price of Up stock is $122.83, and the stock has a standard deviation of 35% per year. The risk-free interest rate is 6.95% per year. Up stock pays no dividends. Use a 365-day year. a. Using the Black-Scholes formula, compute the price of the call. b. Use put-call parity to compute the price of the put with the same strike and expiration date. (Note:Make sure to round all intermediate calculations to at least five decimal places.)