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1. Consider the following information about a European call option on stock ABC: . The strike...
5. Consider a European call option on the stock of XYZ, with a strike price of...
5. Consider a European call option on the stock of XYZ, with a strike price of $25 and two months to expiration. The stock pays continuous dividends at the annual yield rate of 5%. The annual continuously compounded risk free interst rate is 11%. The stock currently trades for $23 per share. Suppose that in two months, the stock will trade for either S18 per share or $29 per share. Use the one-period binomial option pricing model to find today's...
Consider a European put option on the stock of XYZ, with a strike price of $30...
Consider a European put option on the stock of XYZ, with a strike price of $30 and two months to expiration. The stock pays continuous dividends at the annual continuously com- pounded yield rate of 5%. The annual continuously compounded risk free interst rate is 11%. The stock currently trades for $23 per share. Suppose that in two months, the stock will trade for either $18 per share or $29 per share. Use the one-period binomial option pricing to find...
4) A nine-month European call option is written on a stock that provides a continuous dividend...
4) A nine-month European call option is written on a stock that provides a continuous dividend yield of 4%; the strike price is $110, the risk-free rate is 2% and the stock's volatility is 30%. Assume that the stock is currently selling for $115. What is the price of the call?
The price of a European call option on a non-dividend-paying stock with a strike price of...
The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6. The stock price is $51, the continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year. What is the price of a one-year European put option on the stock with a strike price of $50? $2.09 $7.52 $3.58 $9.91
You purchase a 1-year European call option on ABC stock with strike price 100. The option...
You purchase a 1-year European call option on ABC stock with strike price 100. The option premium is $10. The effective annual interest rate is 10%, so that 100 dollars lent for 1 year will return 110 dollars. What is the PROFIT if ABC stock is trading at 111 on the expiration day?
Use the BSM model to calculate the price of a 13-month European call option with a...
Use the BSM model to calculate the price of a 13-month European call option with a strike price of $40 on a stock that is currently $48 and is expected to pay a $5 dividend in 6 months. The risk-free interest rate is 4% (annualized, continuously compounded), and the volatility of the stock’s returns is 55% per annum. (Reminder: your answer can have N(.) terms in it.)
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the...
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the stock price is $33, the strike price is $36, the risk-free rate is 6% per annum, the volatility is 25% per annum and the time to maturity is 6 months. (a) Calculate u and d for a one-step binomial tree. (b) Value the option using a non arbitrage argument. (c) Assume that the option is a put instead of a call. Value the option...
1. A 10-month European call option on a stock is currently selling for $5. The stock...
1. A 10-month European call option on a stock is currently selling for $5. The stock price is $64, the strike price is $60. The continuously-compounded risk-free interest rate is 5% per annum for all maturities. 1) Suppose that the stock pays no dividend in the next ten months, and that the price of a 10-month European put with a strike price of $60 on the same stock is trading at $1. Is there an arbitrage opportunity? If yes, how...
Find the fair value of an European call option and an American put option using the...
Find the fair value of an European call option and an American put option using the incoherent and coherent binomial option tree if the underlying asset pays dividend of 4 PLN in one and half month. The initial stock price is 60 PLN, the strike price of 58 PLN is expiring at the end of the third month, the continuously compounded risk-free interest rate is 10% per annum, and the stock volatility is 20%.
A 10-month European call option on a stock is currently selling for $5. The stock price...
A 10-month European call option on a stock is currently selling for $5. The stock price is $64, the strike price is $60. The continuously-compounded risk-free interest rate is 5% per annum for all maturities. a) Suppose that the stock pays no dividend in the next ten months, and that the price of a 10-month European put with a strike price of $60 on the same stock is trading at $1. Is there an arbitrage opportunity? If yes, how can...
5. Consider a European call option on the stock of XYZ, with a strike price of $25 and two months to expiration. The stock pays continuous dividends at the annual yield rate of 5%. The annual continuously compounded risk free interst rate is 11%. The stock currently trades for $23 per share. Suppose that in two months, the stock will trade for either S18 per share or $29 per share. Use the one-period binomial option pricing model to find today's...
Consider a European put option on the stock of XYZ, with a strike price of $30 and two months to expiration. The stock pays continuous dividends at the annual continuously com- pounded yield rate of 5%. The annual continuously compounded risk free interst rate is 11%. The stock currently trades for $23 per share. Suppose that in two months, the stock will trade for either $18 per share or $29 per share. Use the one-period binomial option pricing to find...
4) A nine-month European call option is written on a stock that provides a continuous dividend yield of 4%; the strike price is $110, the risk-free rate is 2% and the stock's volatility is 30%. Assume that the stock is currently selling for $115. What is the price of the call?
Question 3 - 20 Points Consider a European call option on a non-dividend-paying stock where the stock price is $33, the strike price is $36, the risk-free rate is 6% per annum, the volatility is 25% per annum and the time to maturity is 6 months. (a) Calculate u and d for a one-step binomial tree. (b) Value the option using a non arbitrage argument. (c) Assume that the option is a put instead of a call. Value the option...
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