Consider a binomial world in which the current stock price of 80 can either go up...
Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. Assume a two-period world. Answer the following:
- What is the value of the call if the stock goes up, then down?
- What is the hedge ratio if the stock goes down one period?
- What is the current value of the call?
Homework Answers
consider a 2 period Binomial World
1) What is the hedge ratio if the stock goes down one period?
a.0.00
b..0725
c.1.00
d. .73
What is the Current Value of the Call?
a.8.00
b.7.30
c.11.13
d. .619
Add Answer to:
Consider a binomial world in which the current stock price of 80
can either go up...
Consider a binomial world in which the current stock price of 80 can either go up by 10 percent o...
Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. Assume a one-period world. Answer questions 12 through 15 about a call with an exercise price of 80.What is the current value of the call?2 period (please show your work ) a. 8.00 b. 7.30 c. 11.13 d. 0.619 e. none of the above
The current price of Estelle Corporation stock is $25. Its stock price will either go up...
The current price of Estelle Corporation stock is $25. Its stock price will either go up by 20% or go down by 20% in one year. The stock pays no dividends. The one-year risk-free interest rate is 6%. Using the binomial model, calculate the price of a one-year call option on Estelle stock with a strike price of $25. The price of a one-year call option on Estelle stock with a strike price of $25 is $ (Round to the...
Consider a stock worth K12.50 that can go up or down by 15% per period. Assume...
Consider a stock worth K12.50 that can go up or down by 15% per period. Assume a period process of one. The risk-free rate is 10%. Find the value of the call option today with the strike price of K11.50.
The current price of Estelle Corporation stock is $ 25.00. In each of the next two years, this stock price will either go up by 23 % or go down by 23 %. The stock pays no dividends. The one-year ris...
The current price of Estelle Corporation stock is $ 25.00. In each of the next two years, this stock price will either go up by 23 % or go down by 23 %. The stock pays no dividends. The one-year risk-free interest rate is 5.3 % and will remain constant. Using the Binomial Model, calculate the price of a one-year put option on Estelle stock with a strike price of $ 25.00.
A stock selling at $50 will either go up 20% or go down 10% each month...
A stock selling at $50 will either go up 20% or go down 10% each month for the next 3 months. The risk-free rate is 12% per annum with continuous compounding. Assume that a European put option is available for a strike price of $55 and a maturity of 3 months. a. Use a 3-step binomial model to calculate the price of the put option.
The current price of Kinston Corporation stock is $10. In each of the next two years,...
The current price of Kinston Corporation stock is $10. In each of the next two years, this stock price can either go up by $3.00 or go down by $2.00. Kinston stock pays no dividends. The one year risk-free interest rate is 5% and will remain constant. Using the binomial pricing model, calculate the price of a two-year call option on Kinston stock with a strike price of $9. Please show steps.
The current price of Estelle Corporation stock is $ 23.00 In each of the next two...
The current price of Estelle Corporation stock is $ 23.00 In each of the next two years, this stock price will either go up by 18 % or go down by 18 %. The stock pays no dividends. The one-year risk-free interest rate is 8.0 % and will remain constant. Using the Binomial Model, calculate the price of a one-year call option on Estelle stock with a strike price of $ 23.00
The current price of Estelle Corporation stock is $ 23.00. In each of the next two...
The current price of Estelle Corporation stock is $ 23.00. In each of the next two years, this stock price will either go up by 16 % or go down by 16 %. The stock pays no dividends. The one-year risk-free interest rate is 8.0 % and will remain constant. Using the Binomial Model, calculate the price of a one-year call option on Estelle stock with a strike price of $ 23.00. The price of the one-year call option is...
The current price of Estelle Corporation stock is $22.00. In each of the next two years,...
The current price of Estelle Corporation stock is $22.00. In each of the next two years, this stock price will either go up by 18% or go down by 18%. The stock pays no dividends. The one-year risk-free interest rate is 9.0% and will remain constant. Using the Binomial Model, calculate the price of a one-year call option on Estelle stock with a strike price of $22.00. The price of the one-year call option is $ . (Round to to...
Please help explaining this problem to me. Thank you in advance! 4. Consider the Exxon stock...
Please help explaining this problem to me. Thank you in
advance!
4. Consider the Exxon stock discussed in class, which can go up or down 20% per year and has an initial value of $82. The current annual risk free rate is 1%, compounded annually. You are offered a 5-year European "hybrid" option with strike price $80. This option can be declared, after exactly 3 years, by the purchaser, to be either a call or a put. Find the value...
The current price of Estelle Corporation stock is $25. Its stock price will either go up by 20% or go down by 20% in one year. The stock pays no dividends. The one-year risk-free interest rate is 6%. Using the binomial model, calculate the price of a one-year call option on Estelle stock with a strike price of $25. The price of a one-year call option on Estelle stock with a strike price of $25 is $ (Round to the...
The current price of Estelle Corporation stock is $22.00. In each of the next two years, this stock price will either go up by 18% or go down by 18%. The stock pays no dividends. The one-year risk-free interest rate is 9.0% and will remain constant. Using the Binomial Model, calculate the price of a one-year call option on Estelle stock with a strike price of $22.00. The price of the one-year call option is $ . (Round to to...
Please help explaining this problem to me. Thank you in
advance!
4. Consider the Exxon stock discussed in class, which can go up or down 20% per year and has an initial value of $82. The current annual risk free rate is 1%, compounded annually. You are offered a 5-year European "hybrid" option with strike price $80. This option can be declared, after exactly 3 years, by the purchaser, to be either a call or a put. Find the value...
Most questions answered within 3 hours.
-
Which of these four researchers is most likely to have made Type
1 error
Kim who...
asked 1 minute ago -
Create ER Model
Assets are resources that are used in CMS to display content.
Each asset...
asked 33 seconds ago -
In a performance test, each of two cars takes 8.9 s to
accelerate from rest to...
asked 2 minutes ago -
Sapphire Aerospace operates 52 weeks per year, and its cost of
goods sold last year was...
asked 5 minutes ago -
A. Suppose your manager indicates that for a normally
distributed data set you are analyzing, your...
asked 5 minutes ago -
For each the following molecules draw the best possible
structure based on formal charges for each...
asked 6 minutes ago -
A proton moves in the plane of this paper toward the top of the
page. A...
asked 15 minutes ago -
different divisions differing lines of business use
different costs of capital because their cost of equity...
asked 11 minutes ago -
Give an algorithm to determine whether or not the elements
of
an array of integers are...
asked 19 minutes ago -
. Gravimetric analysis. The gravimetric analysis that we will
perform in lab occurs according to the...
asked 37 minutes ago -
Learning curve problem:
A company was ordered to make 6 custom made parts. the labor
costs...
asked 34 minutes ago -
When you don’t recall operator precedences you can Guess
Experiment with the compiler Look in a...
asked 38 minutes ago