Homework Answers
The payoff will be zero
Put option is in the money which means that market price is lower than the strike price and hence, call option (right to buy at strike price) will not be exercised.
Hence, the payoff will be $0
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QUESTION 10 6 points Save Answer A put option expires $48 in the money, meaning that...
QUESTION 10 A put option expires $6 in the money, meaning that the option's payoff is...
QUESTION 10 A put option expires $6 in the money, meaning that the option's payoff is $6. 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?
QUESTION 6 10 points Save Answer You buy a 1-year put option and sell the corresponding...
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 5 6 points Save Answer Consider three at-the-money (ATM) European PUT options (i.e., S =...
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...
Suppose that a call option with a strike price of $48 expires in one year and...
Suppose that a call option with a strike price of $48 expires in one year and has a current market price of $5.15. The market price of the underlying stock is $46.24, 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. 1. The price of a put option on the same underlying stock with a strike...
QUESTION 4 6 points Save Answer Consider three at-the-money (ATM) European call options (i.e., S =...
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...
QUESTION 8 10 points Save Answer Consider two "corresponding" options, consisting of a call and a...
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 7 8 points Save Answer Consider two "corresponding" options, consisting of a call and a...
QUESTION 7 8 points Save Answer Consider two "corresponding" options, consisting of a call and a put with the exact same parameter values. For this pair, the call premium is $4.5. If the current price of the underlying asset is $82 and the present value of the exercise price is $82, what is the premium of the put option, P? Write the answer with one decimal; e.g., 3.2. Do NOT use the S symbol in your answer; just write a...
A put option that expires in six months with an exercise price of $45 sells for...
A put option that expires in six months with an exercise price of $45 sells for $2.34. The stock is currently priced at $48, and the risk-free rate is 3.5 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Call priceſ A call option with an exercise price of $70 and four months to expiration has...
QUESTION 7 Consider two "corresponding" options, consisting of a call and a put with the exact...
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 9 15 points Save Answer A European PUT option written on one share of Deadwood...
QUESTION 9 15 points Save Answer A European PUT option written on one share of Deadwood Lumber Co. stock has the following parameter values: S = $28, X = $30, r = 5% p.a., o = 20% p.a., T = 6 months. Find the premium of this option, rounded to 2 decimals (e.g., 1.15; do NOT include a dollar sign in your answer). NOTE: Use the continuous time version of the Black-Scholes and Put-Call Parity equations (i.e., do NOT use...
QUESTION 10 A put option expires $6 in the money, meaning that the option's payoff is $6. 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?
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 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 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...
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 7 8 points Save Answer Consider two "corresponding" options, consisting of a call and a put with the exact same parameter values. For this pair, the call premium is $4.5. If the current price of the underlying asset is $82 and the present value of the exercise price is $82, what is the premium of the put option, P? Write the answer with one decimal; e.g., 3.2. Do NOT use the S symbol in your answer; just write a...
A put option that expires in six months with an exercise price of $45 sells for $2.34. The stock is currently priced at $48, and the risk-free rate is 3.5 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Call priceſ A call option with an exercise price of $70 and four months to expiration has...
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 9 15 points Save Answer A European PUT option written on one share of Deadwood Lumber Co. stock has the following parameter values: S = $28, X = $30, r = 5% p.a., o = 20% p.a., T = 6 months. Find the premium of this option, rounded to 2 decimals (e.g., 1.15; do NOT include a dollar sign in your answer). NOTE: Use the continuous time version of the Black-Scholes and Put-Call Parity equations (i.e., do NOT use...
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