PLEASE EXPLAIN THIS CLEARLY, THE ANSWER IS A
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PLEASE EXPLAIN THIS CLEARLY, THE ANSWER IS A 11. The current stock price of ABC. Corp...
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 stock option market maker has a portfolio consisting of 200 shares of ABC Corp, and the following option positions on ABC Corp. For simplicity, each option is assumed to be written on a single share of the stock. Quantity Exercise Price Option Type Price Delta Gamma 100 Stock 120 1 0 150 120 Call 4,3585 0,5362 0,0385 -120 125 Call 4,1383 0,4179 0,0268 100 115 Put 4,1947 -0,3289 0,0202 -100 130 Call 3,5891 0,2982 0,0238 The market maker is...
For ABC Corp. paying a constant annual dividend, its stock price decreased. Which is expected for ABC Corp.: I. Its dividend yield to decrease II. Its dividend yield to increase III Its capital gains yield to decrease IV. Its capital gains yield to increase Select one: a. I only b. I and IlIl only c. Il and IV only d. Il only
For ABC Corp. paying a constant annual dividend, its stock price decreased. Which is expected for ABC Corp.: 1. Its dividend yield to decrease Its dividend yield to increase Its capital gains yield to decrease Its capital gains yield to increase III. IV. Select one: a. ll only O b. II and IV only O c. I and III only d. I only
show work, step by step and explain please. no excel. 1a. For a stock trading at $50 with 15% volatility and 2% risk free interest rate, find the prices of a one month put and call options with a strike price of $50. b. Determine the effect on both the put and call of increasing the strike price to $55 Determine the effect of doubling the time to maturity
The current price of a stock is $31.50 per share, and six-month European call options on the stock with a strike price of $32.50 are currently trading at $3.60. An investor, who has $10,000 of capital to invest, believes that the price of the stock will increase by 20% over the next six months. The investor is trying to decide between two strategies - buying shares or buying call options. What return will each strategy produce after six months, if...
Eagletron's current stock price is $ $10. Suppose that over the current year, the stock price will either increase by 96% or decrease by 51%. Also, the risk-free rate is 25% (EAR). a. What is the value today of a one-year at-the-money European put option on Eagletron stock? b. What is the value today of a one-year European put option on Eagletron stock with a strike price of $19.60? c. Suppose the put options in parts (a) and (b) could...
Eagletron's current stock price is $ 10. Suppose that over the current year, the stock price will either increase by 98% or decrease by 60%. Also, the risk-free rate is 25% (EAR). a. What is the value today of a one-year at-the-money European put option on Eagletron stock? b. What is the value today of a one-year European put option on Eagletron stock with a strike price of $19.80? c. Suppose the put options in parts (a) and (b) could...
A stock option market maker has a portfolio consisting of 200 shares of ABC Corp, and the following option positions on ABC Corp. For simplicity, each option is assumed to be written on a single share of the stock. The market maker is worried about stock price movements in ABC’s stock and would like to make his portfolio delta-neutral and gamma neutral over the night. The current stock price of ABC is $120, the volatility of the stock is 30%,...
Wesley Corp. stock is trading for $ 30 per share. Wesley has 24 million shares outstanding and a market debt-equity ratio of 0.49. Wesley's debt is zero coupon debt with a 5-year maturity and a yield to maturity of 8 %EAR (effective annual rate). a. Describe Wesley's equity as a call option. What is the maturity of the call option? What is the market value of the asset underlying this call option? What is the strike price of this call...