imagine that googles stock price will either rise by one third or fall by 25% over...
Question 4 (25%) West's current stock price is $200. The price may rise to $230 or fall to $170 in one month. The risk-free interest rate is 18% per year. a. Using the replication portfolio approach, determine the price of a call on West's stock with an exercise price of $210 and one month maturity. b. If the stock price will either increase $50 or decrease $56 in month 2, using the risk neutral approach, calculate the price of a...
The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume that the risk-free rate is 10%. What, to the nearest cent, is the value of a 6-month European call option on the stock with a strike price of $33?
A stock currently sells for $50. In six months it will either rise to $60 or decline to $45. The continuous compounding risk-free interest rate is 5% per year. Using the binomial approach, find the value of a European call option with an exercise price of $50. Using the binomial approach, find the value of a European put option with an exercise price of $50. Verify the put-call parity using the results of Questions 1 and 2.
Suppose Disney's stock price is currently $100. In the next six months it will either fall to $80 or rise to $120. What is the option delta of a put option with an exercise price of $100? Need more information. It depends on the risk-free rate. 0.5 -0.5 0
The stock of Kingbird is currently trading for $40 and will either rise to $48 or fall to $32 in one month. The risk-free rate for one month is 1.5 percent. What is the value of a one-month call option with a strike price of $40? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.) Value of a call option is $enter the dollar value of the call option rounded to...
The stock of Splish Brothers is currently trading for $40 and will either rise to $48 or fall to $36 in one month. The risk-free rate for one month is 1.5 percent. What is the value of a one-month call option with a strike price of $40? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.) Value of a call option is $
Suppose IBM's stock price is currently $100. In the next year it will either fall to $70 or rise to $130. What is the price today of a one-year European call option on IBM with an exercise price of 100? The one-year risk-free interest rate is 2% per year. 6 10 0 15.69
ABC's stock price is 88 and in 3 months it will either increase (probability is 50%) by 25% or fall by 25%. Then again over the next 3 months (i.e. from month 3 to month 6) it will again increase (probability is 50%) by 25% or fall by 25%. The risk- free rate for 3 months is constant and equal to 2% (not annualized). a) Find the price of a 6-month European call on ABC stock with exercise price of...
ABC's stock price is 88 and in 3 months it will either increase (probability is 50%) by 25% or fall by 25%. Then again over the next 3 months (i.e. from month 3 to month 6) it will again increase (probability is 50%) by 25% or fall by 25%. The risk- free rate for 3 months is constant and equal to 2% (not annualized). a) Find the price of a 6-month European call on ABC stock with exercise price of...
Over the coming year Ragwort’s stock price will halve to $35 from its current level of $70 or it will rise to $140. The one-year interest rate is 10%. a. What is the delta of a one-year call option on Ragwort stock with an exercise price of $70? (Round your answer to 4 decimal places.) Delta b. Given the delta computed in part (a), how much would be borrowed if the replicating-portfolio method was used to value the call...