UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Textbook Question
Chapter 22, Problem 8QP
Put-Call Parity A put option and a call option with an exercise price of $85 and three months to expiration sell for $6.18 and $5.09, respectively. If the risk-free rate is 4.8 percent per year, compounded continuously, what is the current stock price?
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Chapter 22 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 22 - Options What is a call option? A put option? Under...Ch. 22 - Options Complete the following sentence for each...Ch. 22 - American and European Options What is the...Ch. 22 - Intrinsic Value What is the intrinsic value of a...Ch. 22 - Option Pricing You notice that shares of stock in...Ch. 22 - Options and Stock Risk If the risk of a stock...Ch. 22 - Option Risk True or false: The unsystematic risk...Ch. 22 - Prob. 8CQCh. 22 - Option Price and Interest Rates Suppose the...Ch. 22 - Contingent Liabilities When you take out an...
Ch. 22 - Options and Expiration Dates What is the impact of...Ch. 22 - Options and Stock Price Volatility What is the...Ch. 22 - Insurance as an Option An insurance policy is...Ch. 22 - Equity as a Call Option It is said that the equity...Ch. 22 - Prob. 15CQCh. 22 - Put Call Parity You find a put and a call with the...Ch. 22 - Put- Call Parity A put and a call have the same...Ch. 22 - Put- Call Parity One thing put-call parity tells...Ch. 22 - Two-State Option Pricing Model T-bills currently...Ch. 22 - Understanding Option Quotes Use the option quote...Ch. 22 - Calculating Payoffs Use the option quote...Ch. 22 - Two-State Option Pricing Model The price of Ervin...Ch. 22 - Two-State Option Pricing Model The price of Tara,...Ch. 22 - Put-Call Parity A stock is currently selling for...Ch. 22 - Put-Call Parity A put option that expires in six...Ch. 22 - Put-Call Parity A put option and a call option...Ch. 22 - Pot-Call Parity A put option and a call option...Ch. 22 - Black-Scholes What are the prices of a call option...Ch. 22 - Black-Scholes What are the prices of a call option...Ch. 22 - Delta What are the deltas of a call option and a...Ch. 22 - Prob. 13QPCh. 22 - Prob. 14QPCh. 22 - Time Value of Options You are given the following...Ch. 22 - Prob. 16QPCh. 22 - Prob. 17QPCh. 22 - Prob. 18QPCh. 22 - Black-Scholes A call option has an exercise price...Ch. 22 - Black-Scholes A stock is currently priced at 35. A...Ch. 22 - Equity as an Option Sunburn Sunscreen has a zero...Ch. 22 - Equity as an Option and NPV Suppose the firm in...Ch. 22 - Equity as an Option Frostbite Thermalwear has a...Ch. 22 - Mergers and Equity as an Option Suppose Sunburn...Ch. 22 - Equity as an Option and NPV A company has a single...Ch. 22 - Two-State Option Pricing Model Ken is interested...Ch. 22 - Two-State Option Pricing Model Rob wishes to buy a...Ch. 22 - Two-State Option Pricing Model Maverick...Ch. 22 - Prob. 29QPCh. 22 - Prob. 30QPCh. 22 - Prob. 31QPCh. 22 - Two-State Option Pricing and Corporate Valuation...Ch. 22 - Black-Scholes and Dividends In addition to the...Ch. 22 - Prob. 34QPCh. 22 - Prob. 35QPCh. 22 - Prob. 36QPCh. 22 - Prob. 37QPCh. 22 - Prob. 38QPCh. 22 - Prob. 1MCCh. 22 - Prob. 2MCCh. 22 - Prob. 3MCCh. 22 - Prob. 4MCCh. 22 - Prob. 5MC
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- Using the Black-Scholes model find the premium on a call option with an exercise price of $50 on a share currently priced at $40. Assume the riskless rate of 1% per annum and the option has two years to expiration. The risk of the stock is measured by a σ value of 0.15. Decompose the premium into intrinsic value and time value? By how much is the call option priced above minimum value? Repeat the exercise for a current share price of $60.arrow_forwardWhat are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Stock price = $76 Exercise price = $75 Risk-free rate = 4.50% per year, compounded continuously Maturity = 4 months Standard deviation = 63% per year Call price $ Put price $arrow_forwardSuppose a stock is currently (time t = 0) worth 100. Further, suppose the one year annually compounded interest rate is 2%, and the two year annually compounded rate is 3%. Find the following:a) The forward price for a forward contract on the stock with maturity year T1 = 1. b) The forward price for a forward contract on the stock with maturity year T2 = 2.c) The forward price for a forward contract with maturity T1 = 1 on a ZCB with maturity T2 = 2.d) The forward price for a forward contract with maturity T1 = 1 on a forward contract on the stock with maturity T2 = 2 and delivery price K = 101.arrow_forward
- Using the binomial call option model to find the current value of a call option with a $25 exercise price on a stock currently priced at $26. Assume the option expires at the end of two periods, the riskless interest rate is ½ percent per period. What are the hedge ratios?arrow_forwardWhat are the prices of a call option and a put option with the following characteristics? Stock price = $93 Excerise price = $90 Risk - free rate = 4% per year, compounded continuously Maturity = 5 months Standard deviation = 62% per yeararrow_forwardConsider the following data for a certain share. Current Price = S0 = Rs. 80 Exercise Price = E = Rs. 90 Standard deviation of continuously compounded annual return = \sigma = 0.5 Expiration period of the call option = 3 months Risk – free interest rate per annum = 6 percent a. What is the value of the call option? Use the normal distribution table. b. What is the value of a put option?arrow_forward
- Consider the following data for a certain share. Current Price = So = Rs. 80 Exercise Price = E = Rs. 90 Standard deviation of continuously compounded annual return = 0 = 0.5 Expiration period of the call option 3 months Risk – free interest rate per annum = 6 percent a. What is the value of the call option? Use the normal distribution table. b. What is the value of a put option?arrow_forwardWhat are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Stock price = $74 Exercise price = $70 Risk-free rate= Call price Put price 4.40% per year, compounded continuously Maturity = 4 months Standard deviation = 62% per yeararrow_forwardPut-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 $31 and with 1 year until expiration has a current value of $5.58. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Do not round intermediate calculations. Round your answer to the nearest cent. $arrow_forward
- What are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Stock price Exercise price Risk-free rate Maturity Standard deviation Call price Put price = $81 = $75 3.60% per year, compounded continuously = 5 months = 57% per yeararrow_forwardWhat are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Stock price Exercise price Risk-free rate = $70 = $65 = 4.2% per year, compounded continuously = 4 months Maturity Standard deviation = 60% per year Call price=? Put price=?arrow_forwardSuppose that a call option with a strike price of $48 expires in one year and has a current market price of $5.17. The market price of the underlying stock is $46.25, and the risk-free rate is 1%. Use put-call parity to calculate the price of a put option on the same underlying stock with a strike of $48 and an expiration of one year. The price of a put option on the same underlying stock with a strike of $48 and an expiration of one year is $. (Round to the nearest cent.)arrow_forward
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