A European put option on a non-dividend paying stock has strike price of $40 and time to maturity 9 months. Assume the risk-free interest rate is 5% per annum, the volatility is 20% per annum and the current stock price is $38. Using the Black-Scholes model, calculate the price of the European put option.

A European put option on a non-dividend paying stock has strike price of $40 and time to maturity 9 months. Assume the risk-free interest rate is 5% per annum, the volatility is 20% per annum and the current stock price is $38. Using the Black-Scholes model, calculate the price of the European put option.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A non-dividend-paying stock, currently priced at GH¢125 per share, can either go up by GH¢25or down GH¢25 in a year. Consider a one-year European call option with a strike price ofGH¢135. The continuously-compounded risk-free interest rate is 8%. Use a one-period binomialmodel to determine the current price of the call option.
1
The spot price of a non-dividend paying stock is recorded as ₺100 at the close of the day. You estimate that this price is equally likely to go up by 11.1% or go down by 10% every two months and observe that the continuously compounded annual risk-free rate is 20% per year across all maturities. Use a multistep binomial tree together with the risk-neutral valuation approach to compute the theoretical price of a European put option written on this stock with a strike price of ₺80 and exactly six months until expiration
The current stock price of MRF is ₹ 81000. A European call option on the stock with exercise price of ₹ 75000 will expire in 40days. The annual continuously compounded risk-free interest rate is 10%, standard deviation of the continuously compounded rate of return is 60% p.a. Calculate the value of the Call option. Find the value of the Put option using Put-Call Parity Rule.
A European put option written on a non- dividend paying stock that is currently worth ₺100 in the stock market has a strike price of ₺100 and exactly five months left until its expiration date. If the continuously compounded annual risk-free rate is observed as 20% per year across all maturities and the put option is currently priced at ₺3.20 in the option market, what should be the theoretical price of a European call option written on the same stock that has the same strike price and expiration date as the put option described?
The current stock price is $20, the risk - free interest rate is 5% per annum (consecutive compounding), and the volatility is 15% per annum. Calculate the price of a European call option with a maturity of 3 months and an exercise price of $21. However, this stock is assumed to be non - dividend.
The stock price of Copious Corp. is currently $30. The stock price 1 year(s) from now will be either $34 or $27. The annual risk-free rate is 1.4%. Using the binomial model, what is the value of a call option with an exercise price of $30 and an expiration date 1 year(s) from now?
The price of a European call option on a stock with a strike price of $50.9 is $5.6. The stock price is $40.1, the continuously compounded risk-free rate (all maturities) is 5.2% and the time to maturity is one year. A dividend of $0.6 is expected in six months. What is the price of a one-year European put option on the stock with a strike price equal to the call's strike price? Please state the formula and steps, thanks
An option has strike price of $9 and 12 months to expiry. The current price of the underlying share is $35 and its volatility (sigma) is 23%. The riskfree rate of interest is 4% per annum. Calculate d2 for this option. [your answer should have at least 2 decimal places]
You use a forward binominal tree to price options on a futures contract. You are given: i) The period is 1 year ii) The volatility of the futures price is 30% iii) The initial futures price is 100 iv) The continuously compounded risk-free rate is 3% Calculate the price of a one-year 110-strike European call option on the futures contract. A. 8.68 B 9.13 C 10.32 D 11.54 E 12.06
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