The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $105 per share for months, and you believeit is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $105 is $12.86.a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of$105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimalplaces.)Price of a 3-month call option b-2. What is the most money you can make on this position? (Do not round intermediate calculations. Round your answer to 2decimal places.)Amountb-3. How far can the stock price move in either direction before you lose money? (Do not round intermediate calculations. Roundyour answer to 2 decimal places.)Stock pricec. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock atexpiration? What is the net cost of establishing that position now? (Enter the absolute value. Do not round intermediate calculations.Round your answers to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required.)

The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $105 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $105 is $12.86. a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of a 3-month call option

The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $105 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $105 is $12.86. a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of a 3-month call option

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $105 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $105 is $12.86. a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of a 3-month call option
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $85 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $85 is $8.00. Required: a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $85 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Complete this question by entering your answers in the tabs…
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $50per share for months, and you believe it is going to stay in that range for the next 3 months. Theprice of a 3-month put option with an exercise price of $50 is $4.a. If the risk-free interest rate is 10% per year, what must be the price of a 3-month call optionon C.A.L.L. stock at an exercise price of $50 if it is at the money? (The stock pays nodividends.)b. What would be a simple options strategy using a put and a call to exploit your convictionabout the stock price’s future movement? What is the most money you can make on thisposition? How far can the stock price move in either direction before you lose money?c. How can you create a position involving a put, a call, and riskless lending that would havethe same payoff structure as the stock at expiration? What is the net cost of establishing thatposition now?
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $135 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $135 is $10.70. Required: a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $135 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c.How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Complete this question by entering your answers in the…
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $95 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $95 is $6.00. Required: a. If the semiannual risk-free interest rate is 5%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $95 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Complete this question by entering your answers in the tabs…
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XYZ Corp. will pay a $2 per share dividend in 2 months. Its stock price currently is $72 per share. A call option on XYZ has an exercise price of $65 and 3-month time to expiration. The risk-free interest rate is 0.3% per month, and the stock's volatility (standard deviation) = 12% per month. Find the pseudo-American option value. (Hint: Try defining one "period" as a month, rather than as a year.) (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Pseudo-American option value
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XYZ Corporation will pay a $2 per share dividend in two months. Its stock price currently is $80 per share. A European call option on XYZ has an exercise price of $75 and 3-month time to expiration. The risk-free interest rate is 0.95% per month, and the stock's volatility (standard deviation) - 18 % per month. Find the Black-Scholes value of the option. (Hint: Try defining one "period" as a month, rather than as a year, and think about the net-of-dividend value of each share.) Note: Round your answer to 2 decimal places. Black-Scholes value of the option