Which of the following statements is least accurate? The value of a: Call option will decrease...
- Which of the following statements is least accurate? The value
of a:
- Call option will decrease as the Rf rate increases.
- Put option will decrease as the exercise price decreases.
- Call option will decrease as the underlying stock price decreases.
Homework Answers
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Which of the following statements is least accurate? The value
of a:
Call option will decrease...
The current market price of a share of Disney stock is $30. If a call option...
The current market price of a share of Disney stock is $30. If a call option on this stock has a strike price of $35, the call is out of the money. is in the money. can be exercised profitably. is out of the money and can be exercised profitably. is in the money and can be exercised profitably. The maximum loss for a writer of a put option on a stock is unlimited. equal to the exercise price. equal...
In the use of the Black-Scholes option valuation model to determine the value of a European...
In the use of the Black-Scholes option valuation model to determine the value of a European call option, which one of the following relationships is NOT correct? A. An increase in the risk-free rate increases the value of the European call option. B. An increase in the exercise price of the European call option increases the value of the option. C. An increase in the price of the underlying stock increases the value of the European call option. D. An...
To compute the value of a put using the Black-Scholes option pricing model, you: A) subtract...
To compute the value of a put using the Black-Scholes option pricing model, you: A) subtract the value of an equivalent call from 1.0. B) have to compute the value of the put as if it is a call and then apply the put-call parity formula. C) subtract the value of an equivalent call from the market price of the stock. D) assume the equivalent call is worthless and then apply the put-call parity formula. E) multiply the value of...
Question 17. You have the following information for a three-month Call option. S(0): 150 kr X:...
Question 17. You have the following information for a three-month Call option. S(0): 150 kr X: Call: rf: T: 140 kr 12 kr 1% 3 months (S(0) = Stock price at time 0, X = Strike price, Call = price or a Call option, rf = the risk free rate, T = time to maturity) a) How much is a three month Put option worth with the same strike and underlying asset? b) What would rf have to be for...
8. The five factors affecting prices of call and put options Both call and put options...
8. The five factors affecting prices of call and put options Both call and put options are affected by the following five factors: the exercise price, the underlying stock price, the time to expiration, the stock’s standard deviation, and the risk-free rate. However, the direction of the effects on call and put options could be different. Use the following table to identify whether each statement describes put options or call options: Statement Put Option Call Option 1. An increase in...
1. Consider a call option selling for $ 4 in which the exercise price is $50....
1. Consider a call option selling for $ 4 in which the exercise price is $50. A) Determine the value at expiration and the profit for a buyer under the following outcomes: i. The price of the underlying at expiration is $55 ii. The price of the underlying at expiration is $51 iii. The price of the underlying at expiration is $48 B) Determine the value at expiration and the profit for a seller under the following outcomes: i. The...
Consider the following call option: The current price of the stock on which the call option...
Consider the following call option: The current price of the stock on which the call option is written is $32.00; The exercise or strike price of the call option is $30.00; The maturity of the call option is .25 years; The (annualized) variance in the returns of the stock is .16; and The risk-free rate of interest is 4 percent. Use the Black-Scholes option pricing model to estimate the value of the call option.
Which of the statements is (are) correct? Check All That Apply A) A Google call option...
Which of the statements is (are) correct? Check All That Apply A) A Google call option buyer expects Google's share price will increase. A Google call option buyer expects Google's share price will increase. B) An Amazon put option buyer expects Amazon's share price will decrease.An Amazon put option buyer expects Amazon's share price will decrease. C) A Nvidia call option writer expects Nvidia's share price will decrease.A Nvidia call option writer expects Nvidia's share price will decrease. D) A...
QUESTION 19 Kenny Silver, CFA, is estimating the price of a call option. The call has...
QUESTION 19 Kenny Silver, CFA, is estimating the price of a call option. The call has an exercise price of $100 and a remaining time to expiration of 273 days. The spot price of the underlying stock is $93.25 and a put of the same underlying stock, exercise price and remaining time to expiration is currently priced at $6.50. Assuming a risk-free rate of 8% and a 365-day period, the call option’s arbitrage-free price is a. $5.34 b. $7.66 c....
6. A call option has an exercise price of $45 and a premium of $4. If...
6. A call option has an exercise price of $45 and a premium of $4. If the price of the underlying stock is $60, the total payoff of the option is ____? 7. A put option has an exercise price of $20 and a premium of $2. If the price of the underlying stock is $11, what of the total payoff of the option? 8. You write a call option with an exercise price of $67 and a premium of...
To compute the value of a put using the Black-Scholes option pricing model, you: A) subtract the value of an equivalent call from 1.0. B) have to compute the value of the put as if it is a call and then apply the put-call parity formula. C) subtract the value of an equivalent call from the market price of the stock. D) assume the equivalent call is worthless and then apply the put-call parity formula. E) multiply the value of...
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