Solution:
Call premium ( C) = $4.5
Current price = $82
Present value of exercise price ( PV ) = $82
Premium of put option ( P) = ?
Put call parity
P = C + PV - Current price
P = $4.5 + $82 - $82= $4.5
Premium of put option = $4.5
QUESTION 7 8 points Save Answer Consider two "corresponding" options, consisting of a call and a...
QUESTION 7 Consider two "corresponding" options, consisting of a call and a put with the exact same parameter values. For this pair, the call premium is $8.6. If the current price of the underlying asset is $48 and the present value of the exercise price is $48, what is the premium of the put option, P? Write the answer with one decimal; e.g., 3.2. Do NOT use the $ symbol in your answer; just write a numerical value
QUESTION 8 10 points Save Answer Consider two "corresponding" options, consisting of a call and a put with the exact same parameter values. For this pair, the current price of the underlying asset is $85, the options have an exercise price of $98 and they expire in 8 months. Additionally, the risk-free rate is 8% p.a. What is the difference between the premium of the put option, P, and the premium of the call option, C; that is, what is...
QUESTION 8 Consider two "corresponding" options, consisting of a call and a put with the exact same parameter values. For this pair, the current price of the underlying asset is $96, the options have an exercise price of $87 and they expire in 7 months. Additionally, the risk-free rate is 4% p.a. What is the difference between the premium of the put option, P, and the premium of the call option, C; that is, what is the value of P...
QUESTION 4 6 points Save Answer Consider three at-the-money (ATM) European call options (i.e., S = X for each of them) written on the same underlying asset, with the following common parameter values: r=0% p.a. and 0 = 100% p.a. However, one of the options matures in T = 12 months, another in T = 24 months, and the last one matures in 36 months. Based on the premiums of these three call options, what do you conclude regarding the...
You form a long straddle by buying a call with a premium of C = $6, and buying a put with a premium of P = $5. Both options have an exercise price of X = $30, both mature in 1 months, and both have the same underlying asset. Find the profit of this straddle when the price of the underlying asset is S = $32. Do NOT use the $ symbol in your answer; just write a numerical value....
8. The five factors affecting prices of call and put options Both call and put options are affected by the following five factors: the exercise price, the underlying stock price, the time to expiration, the stock’s standard deviation, and the risk-free rate. However, the direction of the effects on call and put options could be different. Use the following table to identify whether each statement describes put options or call options: Statement Put Option Call Option 1. An increase in...
QUESTION 5 6 points Save Answer Consider three at-the-money (ATM) European PUT options (i.e., S = X for each of them) written on the same underlying asset, with the following common parameter values: r=0% p.a. and g = 100% p.a. However, one of the options matures in T = 12 months, another in T = 24 months, and the last one matures in 36 months. Based on the premiums of these three put options, what do you conclude regarding the...
QUESTION 6 10 points Save Answer You buy a 1-year put option and sell the corresponding call option. Both options are written on 1 share of IBM stock and both have an exercise price of $98. In addition, you also buy 1 share of IBM stock. What is the net payoff you receive from this 3-asset portfolio if at expiration the price of each share of IBM stock is $45?
QUESTION 3 15 points Save Answer A European call option written on one share of Medident Corp. has the following parameter values: S = $220, X = $200, r = 5% p.a., sigma = 20% p.a., T 9 months. Find the call option's premium, rounded to 2 decimals (e.g., 3.24). Do NOT include the S sign in your answer; write only the numerical value. NOTE: Use the continuous time version of the Black-Scholes equation (i.e., do NOT use the book's...
QUESTION 10 6 points Save Answer A put option expires $48 in the money, meaning that the option's payoff is $48. What is the payoff at expiration of the "corresponding" call option; that is, a call option with the exact same parameter values as the put option?