A stock is currently priced at $52.00. The risk free rate is 4.6% per annum with continuous compounding. In 5 months, its price will be $60.84 with probability 0.57 or $44.72 with probability 0.43. Using the binomial tree model, compute the present value of your expected profit if you buy a 5 month European call with strike price $57.00. Recall that profit can be negative.
A stock is currently priced at $52.00. The risk free rate is 4.6% per annum with...
A stock is currently priced at $47.00 and pays a dividend yield of 3.7% per annum. The risk-free rate is 5.3% per annum with continuous compounding. In 18 months, the stock price will be either $40.89 or $52.64. Using the binomial tree model, compute the price of a 18 month European call with strike price $48.74.
A stock is currently priced at $51.00 and pays a dividend yield of 4.3% per annum. The risk-free rate is 5.7% per annum with continuous compounding. In 12 months, the stock price will be either $41.31 or $57.12. Using the binomial tree model, compute the price of a 12 month European call with strike price $50.32.
A stock is currently priced at $75.00. The risk free rate is 4.5% per annum with continuous compounding. Use a one-time step Cox-Ross-Rubenstein model for the price of the stock in 13 months assuming the stock has annual volatility of 24.9%. Compute the price of a 13 month call option on the stock with strike $80.00.
Please show all work thank you! (1 point) For all problems in this section, use the binomial tree model. Unless otherwise stated, assume no arbitrage. A stock is currently priced at $45.00. The risk free rate is 4.7% per annum with continuous compounding. In 5 months, its price will be $50.85 with probability 0.58 or $39.15 with probability 0.42. Using the binomial tree model, compute the present value of your expected profit if you buy a 5 month European call...
Value of a stock is currently at $40. Volatility of that stock is 30% per year and risk-free interest rate with continuous compounding is at 5% per year. Suppose you are planning to value a 3-month European call option with strike price at $41 using a two-step binomial model. Answer the following using this information. (Binomial Tree Approach to Option Valuation describe how to solve this problem) What are the values of u, d and q?
. The spot price per share is $115 and the risk free rate is 5% per annum on a continuously compounded basis. The annual volatility is 20% and the stock does not pay any dividend. All options have a one-year maturity. In answering the questions below use a binomial tree with three steps. Each step should be one-third of a year. Show your work. 1.Using the binomial tree, compute the price at time 0 of a one-year European call option...
Problem 12.25. Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is six months a. Calculate u, d, and p for a two step tree b. Value the option using a two step tree. c. Verify that DerivaGem gives the same answer d. Use DerivaGem to value the option with 5,...
A stock index currently stands at 500. The risk-free interest rate is 5 percent per annum (with continuous compounding) and the dividend yield is 3 percent per annum. What should the futures price for a 3-month contract be?
The spot price per share is $115 and the risk free rate is 5% per annum on a continuously compounded basis. The annual volatility is 20% and the stock does not pay any dividend. All options have a one-year maturity. In answering the questions below use a binomial tree with three steps. Each step should be one-third of a year. 1)Using the binomial tree, compute the price at time 0 of a one-year European put option on 100 shares of...
A futures price is currently $25, its volatility (SD) is 30% per annum, and the risk-free interest rate is 10% per annum. What is the value of a nine-month European call on the futures with a strike price of $26 according to the BSM option pricing model?