PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 20, Problem 20PS
Put–call parity* In April 2017, Facebook’s stock price was about $145. An eight-month call on the stock, with an exercise price of $145, sold for $10.18. The risk-free interest rate was 1% a year. How much would you be willing to pay for a put on Facebook stock with the same maturity and exercise price? Assume that the Facebook options are European options. (Note: Facebook does not pay a dividend.)
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Today is January 12, 2017. The shares of XYZ Inc. are currently selling for $120 per share. The shares have an estimated volatility of 25%. XYZ Inc. is also expected to pay a dividend of $1.50 with an ex-dividend date of January 25, 2017. The risk-free rate is 6.17 percent per year with continuous compounding. Assume that one call option gives the holder the right to purchase one share.
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Give typing answer with explanation and conclusion
What is the lower bound for the price of a 7-month European call option on a non-dividend-paying stock when the stock price is $44.02, the strike price is $39, and the risk-free interest rate is 1.3% per annum? Report your answer in dollars and cents.
Chapter 20 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 20 - Vocabulary Complete the following passage: A _____...Ch. 20 - Option payoffs Note Figure 20.12 below. Match each...Ch. 20 - Option payoffs Look again at Figure 20.12. It...Ch. 20 - Option payoffs What is a call option worth at...Ch. 20 - Option payoffs The buyer of the call and the...Ch. 20 - Option combinations Suppose that you hold a share...Ch. 20 - Option combinations Dr. Livingstone 1. Presume...Ch. 20 - Option combinations Suppose you buy a one-year...Ch. 20 - Option combinations Suppose that Mr. Colleoni...Ch. 20 - Option combinations Option traders often refer to...
Ch. 20 - Prob. 11PSCh. 20 - Option combinations Discuss briefly the risks and...Ch. 20 - Put-call parity A European call and put option...Ch. 20 - Putcall parity a. If you cant sell a share short,...Ch. 20 - Putcall parity The common stock of Triangular File...Ch. 20 - Put-call parity What is put-call parity and why...Ch. 20 - Putcall parity There is another strategy involving...Ch. 20 - Putcall parity It is possible to buy three-month...Ch. 20 - Putcall parity In April 2017, Facebooks stock...Ch. 20 - Option bounds Pintails stock price is currently...Ch. 20 - Option values How does the price of a call option...Ch. 20 - Option values Respond to the following statements....Ch. 20 - Option values FX Bank has succeeded in hiring ace...Ch. 20 - Option values Is it more valuable to own an option...Ch. 20 - Option values Youve just completed a month-long...Ch. 20 - Option values Table 20.4 lists some prices of...Ch. 20 - Option bounds Problem 21 considered an arbitrage...Ch. 20 - Prob. 30PSCh. 20 - Prob. 31PSCh. 20 - Prob. 32PS
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