True or false
2. A call option with a strike price of 101 on a zero-coupon bond will never be in the money.
True
In the money call option means the market price of underlying stock is greater than strike price of call option. Assuming above coupon bond has par value of $100 and its call option strike price is $101. A zero-coupon bond always priced at discount which means its market price always less than its par value until it reaches to its maturity. Since, call option strike price is above the zero-coupon bond's par value, market price of zero coupon bond never exceed the strike price of call thus, this call option with strike price of $101 on a zero coupon bond will never be in the money.
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
True or false 2. A call option with a strike price of 101 on a zero-coupon...
If a call option with a strike price of $65.00 is in the money then: Select one: a. a put option with the same strike price is also in the money. b. the intrinsic value of the call is negative. c. the intrinsic value of a put option with the same strike price is negative. d. a put option with a strike price of $60.00 is out of the money.
Consider a put option and a call option with the same strike price and time to maturity. Which of the following is TRUE? It is possible for both options to be in the money. One of the options must be either in the money or at the money. One of the options must be in the money. It is possible for both options to be out of the money.
Consider a European call option on a non-dividend-paying stock. The strike price is K, the time to expiration is T, and the price of one unit of a zero-coupon bond (with face value one) maturing at T is B(T). Denote the price of the call by C. Show that C > max{0, So β KB(T)}, where So is the current stock price.
Consider a European call option on a non-dividend-paying stock. The strike price is K, the time to expiration is T, and the price of one unit of a zero-coupon bond (with face value one) maturing at T is B(T). Denote the price of the call by C. Show that C2 max{0, So - KB(T)}, where So is the current stock price.
Consider a call option with strike price of 2.5. Underlying stock is expected to follow the distribution: Price Prob 1 0.05 2 0.20 3 0.25 4 0.25 5 0.20 6 0.05 1. When stock price is above the strike price of 2.5, what is the average value of the stock? (hint: first find conditional probabilities and then do a weighted average) 2. What is the average payment from the call option when the call option is in the money (ie...
With a covered call strategy, an advantage of selecting a low strike price for the call option is: A. itβs more likely to expire out-the-money than a call with a higher strike price B. it costs less to buy than a call option with a higher strike price C. the cash inflow from the premium is higher than for a call option with a higher strike price D. the maximum profit is greater than for a call option with a...
A: Long one in-the-money call option with strike (current stock price β$3) and one out-of-the money call option with strike (current stock price +$3) B: Long two at-the-money call options. All options are on the same asset and have the same maturity. Which one is better?
A put option and a call option on a stock have the same expiration date and the same exercise (or strike price). Both options expire in 6 months. Assume that put-call parity holds and interest rate is positive. If both call and put options have the same price, which of the following is true? A) Put option is in-the-money. B) Call option is in-the-money. C) Both call and put options are in-the-money. D) Both call and put options are out-of-the-money.
A European call option and put option on a stock both have a strike price of $45 and an expiration date in six months. Both sell for $2. The risk-free interest rate is 5% p.a. The current stock price is $43. There is no dividend expected for the next six months. a) If the stock price in three months is $48, which option is in the money and which one is out of the money? b) As an arbitrageur, can...
The price of a call option with a strike of $100 is $10. The price of a put option with a strike of $100 is $5. Interest rates are 0 and the current price of the underlying is $100. Can you make an arbitrage profit? If so how? Describe the trade and your pay offs in detail?