no hand writing please 13. Suppose that the current price of an asset is $31. The...
I. The risk-free rate is 3%. Apple (AAPL) will pay a $3 dividend in 2 months. The price of a 6-month European put on AAPL with strike $160 is $12. . The price of a 6-month European put on AAPL with strike $150 is $6 . The price of a 6-month European put on AAPL with strike $140 is $10 . The price of a 6-month European call on AAPL with strike $150 is $13 Describe an arbitrage opportunity. What...
25. The price of a stock with no dividends, is $35 and the strike price of a 1year European call option on the stock is $30. The risk-free rate is 4% (continuously compounded). Compute the lower bound for the call option such that there are arbitrage opportunities if the price is below the lower bound and no arbitrage opportunities if it is above the lower bound? Please show your work. 26. A stock price with no dividends is $50 and...
1a) The current price of a stock is $43, and the continuously compounded risk-free rate is 7.5%. The stock pays a continuous dividend yield of 1%. A European call option with a exercise price of $35 and 9 months until expiration has a current value of $11.08. What is the value of a European put option written on the stock with the same exercise price and expiration date as the call? Answers: a. $5.17 b. $3.08 c. $1.49 d. $2.50...
Problem1 A stock is currently trading at S $40, during next 6 months stock price will increase to $44 or decrease to $32-6-month risk-free rate is rf-2%. a. [4pts) What positions in stock and T-bills will you put to replicate the pay off of a European call option with K = $38 and maturing in 6 months. b. 1pt What is the value of this European call option? Problem 2 Suppose that stock price will increase 5% and decrease 5%...
A call option has a premium of $0.60, a strike price of $40, and 3 months to expiration. The current stock price is $39.60. The stock will pay a $0.80 dividend two months from now. The risk-free rate is 3 percent. What is the premium on a 3-month put with a strike price of $40? Assume the options are European style.
Question 1 a. A stock price is currently $30. It is known that at the end of two months it will be either $33 or $27. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a two-month European put option with a strike price of $31? b. What is meant by the delta of a stock option? A stock price is currently $100. Over each of the next two three-month periods it is...
14. A call option has a premium of $0.60, a strike price of $40, and 3 months to expiration. The current stock price is $39.60. The stock will pay a $0.80 dividend two months from now. The risk-free rate is 3 percent. What is the premium on a 3-month put with a strike price of $40? Assume the options are European style. Page 4
the value of a put and the the value of 8- The higher the strike price, the a call, all else being equal. a) higher, higher b) lower; lower c) higher, lower d) lower, higher e) Doesn't move; higher 9-A 5-month European call option on a non-dividend-paying stock has a strike price of $30. The underlying stock is selling for $32 and the risk free rate is 6%. If the market value of the call is $35, is there any...
Consider an asset that trades at $100 today. Suppose that the European call and put options on this asset are available both with a strike price of $100. The options expire in 275 days, and the volatility is 45%. The continuously compounded risk-free rate is 3%. Determine the value of the European call and put options using the Black-Scholes-Merton model. Assume that the continuously compounded yield on the asset is 1,5% and there are 365 days in the year.
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...