There is a positive relationship between the value of a call option and time until expiration....
There is a positive relationship between the value of a call option and time until expiration.
- True
- False
Homework Answers
- True
When the time to expiration is higher, there is a higher chance of stock ending in the money. Since there is a higher chance of stock ending in the money when time to expiration is higher, there is a positive relationship between the value of a call option and time until expiration. When time to expiration is less, value of call option will be less.
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There is a positive relationship between the value of a call
option and time until expiration....
2. As the time to expiration becomes longer, an American call option always becomes more valuable....
2. As the time to expiration becomes longer, an American call option always becomes more valuable. (a) True (b) False
A call option has a strike price of 30 in dollars, and a time to expiration...
A call option has a strike price of 30 in dollars, and a time to expiration of 0.1 in years. If the stock is trading for 85 dollars, N(d1) = 0.5, N(d2) = 0.4, and the risk free rate is0.04, what is the value of the call option?
Netflix is selling for $100 a share. A Netflix call option with one month until expiration...
Netflix is selling for $100 a share. A Netflix call option with one month until expiration and an exercise price of $111 sells for $2.40 while a put with the same strike and expiration sells for $12.18. a. What is the market price of a zero-coupon bond with face value $111 and 1-month maturity? a. What is the market price of a zero-coupon bond with face value $111 and 1-month maturity b. What is the risk-free interest rate expressed as...
Netflix is selling for $105 a share. A Netflix call option with one month until expiration...
Netflix is selling for $105 a share. A Netflix call option with one month until expiration and an exercise price of $121 sells for $2.30 while a put with the same strike and expiration sells for $17.40. a. What is the market price of a zero-coupon bond with face value $121 and 1-month maturity? (Round your answer to 2 decimal places.) Market price b. What is the risk-free interest rate expressed as an effective annual yield? (Round your answer to...
Netflix is selling for $100 a share. A Netflix call option with one month until expiration...
Netflix is selling for $100 a share. A Netflix call option with one month until expiration and an exercise price of $109 sells for $2.40 while a put with the same strike and expiration sells for $11.25. a. What is the market price of a zero-coupon bond with face value $109 and 1-month maturity? (Round your answer to 2 decimal places.) Market price b. What is the risk-free interest rate expressed as an effective annual yield? (Round your answer to...
Netflix is selling for $105 a share. A Netflix call option with one month until expiration...
Netflix is selling for $105 a share. A Netflix call option with one month until expiration and an exercise price of $121 sells for $2.30 while a put with the same strike and expiration sells for $17.40. a. What is the market price of a zero-coupon bond with face value $121 and 1-month maturity? (Round your answer to 2 decimal places.) Market price b. What is the risk-free interest rate expressed as an effective annual yield? (Round your answer to...
9. Put-call parity and the value of a put option Aa Aa E Consider two portfolios...
9. Put-call parity and the value of a put option Aa Aa E Consider two portfolios A and B. At the expiration date, t, both portfolios have identical payoffs. Portfolio A consists of a put option and one share of stock. Portfolio B has a call option (with the same strike price and expiration date as the put option) and cash in the amount equal to the present value (PV) of the strike price discounted at the continuously compounded risk-free...
Consider a call option with one year time remaining to expiration and the table below (15...
Consider a call option with one year time remaining to expiration and the table below (15 pts) Time Stock Price Call Exercise Price Call premium Now 32 30 4 Later 29 30 1 Provide the result of the covered call writing strategy in the table below in the context of marking to market only. Write as to what you are doing in each block and show numbers. Time Stock Position Call Option Position Net or combined position Now Action:...
True or False 1.An option buyer exercises only if his profit is positive. 2.An option buyer...
True or False 1.An option buyer exercises only if his profit is positive. 2.An option buyer will not exercise if doing so results in a loss (i.e. if her overall profit is negative). 3.A writer of a put option exercises if her payoff is positive. 4.American options are traded in the US, while European options are traded in Europe. 5.The sum of a call buyer’s profit and a call seller’s profit is always positive. 6.The sum of put buyer and...
Suppose you buy a June expiration call option on 30 shares of Apple stock with the...
Suppose you buy a June expiration call option on 30 shares of Apple stock with the exercise price of $240. If the stock price is $256 in June (just before expiration) – would you exercise this option? A. Yes B. No C. Impossible to determine D. You would have to wait until after the expiration date
Netflix is selling for $105 a share. A Netflix call option with one month until expiration and an exercise price of $121 sells for $2.30 while a put with the same strike and expiration sells for $17.40. a. What is the market price of a zero-coupon bond with face value $121 and 1-month maturity? (Round your answer to 2 decimal places.) Market price b. What is the risk-free interest rate expressed as an effective annual yield? (Round your answer to...
Netflix is selling for $100 a share. A Netflix call option with one month until expiration and an exercise price of $109 sells for $2.40 while a put with the same strike and expiration sells for $11.25. a. What is the market price of a zero-coupon bond with face value $109 and 1-month maturity? (Round your answer to 2 decimal places.) Market price b. What is the risk-free interest rate expressed as an effective annual yield? (Round your answer to...
Netflix is selling for $105 a share. A Netflix call option with one month until expiration and an exercise price of $121 sells for $2.30 while a put with the same strike and expiration sells for $17.40. a. What is the market price of a zero-coupon bond with face value $121 and 1-month maturity? (Round your answer to 2 decimal places.) Market price b. What is the risk-free interest rate expressed as an effective annual yield? (Round your answer to...
9. Put-call parity and the value of a put option Aa Aa E Consider two portfolios A and B. At the expiration date, t, both portfolios have identical payoffs. Portfolio A consists of a put option and one share of stock. Portfolio B has a call option (with the same strike price and expiration date as the put option) and cash in the amount equal to the present value (PV) of the strike price discounted at the continuously compounded risk-free...
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