Fundamentals of Corporate Finance, 9th edition (Exclude Access Card)
9th Edition
ISBN: 9781260149586
Author: Richard Brealey, Stewart Myers, Alan Marcus
Publisher: McGraw-Hill Education
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Chapter 23, Problem 2QP
Summary Introduction
To calculate: The profits and payoffs for the investments.
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Use the data in the figure 20.1 and calculate thepayoff and the profits for investments in each ofthe following January expiration options, assumingthat the stock price on the expiration date is $125.a. Call option, X=$120b. Put option, X=$120c. Call option, X=$125d. Put option, X=$125e. Call option, X=$130f. Put option, X=$130
Required:
Refer to Figure 15.1, which lists the prices of various Microsoft options. Use the data in the figure to calculate the payoff and the
profit/loss for investments in each of the following December 2019 expiration options on a single share, assuming that the stock price
on the expiration date is $137. (Loss amounts should be indicated by a minus sign. Round "Profit/Loss" to 2 decimal places.)
a. Call option, X = 135
b. Put option, X = 135
es
c. Call option, X = 145
d. Put option, X = 145
Payoff
Profit/Loss
1) Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $40, S = $37.90, r = 5.0%, σ = 0.35
2) Draw the binomial tree listing only the stock prices at each node. Assume the following data on a 6-month call option, using 3-month intervals as the time period. K = $70, S = $68.50, r = 6.0%, σ = 0.32
3) Draw the binomial tree listing only the option prices at each node. Assume the following data on a 6-month put option, using 3-month intervals as the time period. K = $40.00, S = $37.90, r = 5.0%, σ = 0.35
4) Using a binomial tree explanation, explain the situation in which an American option would alter the pricing of an option.
Chapter 23 Solutions
Fundamentals of Corporate Finance, 9th edition (Exclude Access Card)
Ch. 23 - Prob. 1QPCh. 23 - Prob. 2QPCh. 23 - Prob. 3QPCh. 23 - Prob. 4QPCh. 23 - Prob. 5QPCh. 23 - Prob. 6QPCh. 23 - Prob. 7QPCh. 23 - Prob. 8QPCh. 23 - Prob. 9QPCh. 23 - Prob. 10QP
Ch. 23 - Prob. 11QPCh. 23 - Prob. 12QPCh. 23 - Prob. 13QPCh. 23 - Prob. 14QPCh. 23 - Prob. 15QPCh. 23 - Prob. 16QPCh. 23 - Prob. 17QPCh. 23 - Prob. 18QPCh. 23 - Prob. 22QPCh. 23 - Prob. 23QPCh. 23 - Prob. 24QPCh. 23 - Prob. 25QPCh. 23 - Prob. 26QPCh. 23 - Prob. 27QPCh. 23 - Prob. 28QPCh. 23 - Prob. 29QPCh. 23 - Prob. 30QPCh. 23 - Prob. 31QP
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