A non dividend-paying stock currently trades at $80. You short sell one share of stock, buy a call option and write a put option, both with a strike price of $51. Your immediate cash inflow is $47.84. Both options expire in one year.
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- Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price Stock price Annual interest rate Dividend 6 months 43% per year $58 $57 2% 0 Calculate the value of a call option. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of a call optionUse the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price 6 months 51% per year $41 $39 Annual interest rate 6% Dividend 0 Stock price Calculate the value of a put option. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Value of a put optionAssume a stock trades at $95, the volatility of the stock is 36%, and the risk-free interest rate is 3.9%. What is the Rho of a $101 strike call option expiring in 249 days if the risk-free interest rate increases by 0.1%? Please answer to 2 decimal places. Correct Answers 0.03 (with margin: 0.01
- stock price is currently $100. you buy a put option with a strike price of $85 and premium $2.50 expiring in 6 months. how high should the stock price be on the expiration day for you to break even on this strategy? a. $102.50 b. $97.50 c. $87.50 d. $82.50Question A .The price of an American call on a non-dividend-paying stock is $4. The stock price is $31, the strike price is $30, and the expiration date is in 3 months. The risk-free interest rate is 8%. The upper and lower bounds for the price of an American put on the same stock with the same strike price and expiration date is $3.00 and $2.41, respectively. Explain carefully the arbitrage opportunities if the American put price is greater than the calculated upper bound. Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this lineQuestion 4. A stock that pays no dividends has price today of 100. In one year’s time the stock is worth 110 with probability 0.75 and 85 with probability 0.25. The one-year annually compounded interest rate is 5%. a) Calculate the forward price of the stock for a forward contract with maturity one year. b) Calculate the price of a one-year European put option with strike 100. c) Suppose you observe that the put option in part (b) has a market price of 4. Determine an arbitrage portfolio and calculate how much profit is generated at time T = 1 by this portfolio.
- 4. JP Morgan's current stock price is $104.50. You purchase 7 December $110 call options on JP Morgan. The call premium (i.e., call price) on these options is $4.55. If JP Morgan's stock price at expiration is $118.25, what is your dollar profit or loss on this investment at expiration?Q.20 The risk manager of a large investment bank is reviewing the bank's investments in options contracts. He is particularly interested in call options contracts on shares of Hamilton Invest that the bank bought a few months ago. Hamilton Invest just unexpectedly announced that they would pay a USD 3 dividend per share in the sixth and twelfth months. The risk manager is concerned with the impact of dividends on the option's price. The risk- free rate is 5%, and the option has the following characteristics: A By how much will the price of the options change after the announcement of the dividends? Assume that N(d,) before and after the announcement of the dividend is 0.7654 and N(d₂) before and after the announcement of the dividend is 0.5489? B Strike price Expiration Underlying's Price Annual volatility The price of the option will increase by USD 3.32 USD 140 13 months USD 151 35% The price of the option will decrease by USD 3.32Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 46% per year Exercise price $48 Stock price $46 Annual interest rate 6% Dividend 0 Calculate the value of a put option. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Value of a put option
- Assume that a stock trading for $30 today will be worth either $25 or $35 in two years. A risk-free asset offers an annualized 3% return (continuously compounded) over that time period. • What is the price today of a two-year put option on this stock with a strike price of $32? The maximum error is 0.1. O a. 1.52 O b. 2.47 O c. 1.82 O d. None of these answers O e. 2.07The 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 zero. An investor sells put options with a strike price of $32. What is the risk-neutral probability of the underlying hitting $36 and what is the value of each put option? Question 5Answer a. 0.4 and $3.6 b. 0.6 and $3.6 c. 0.6 and $1.6 d. 0.4 and $1.6What is the price of a $25 strike call? Assume S = $23.50, \sigma 0.24, г 0.055, the stock pays a 2.5%continuous dividend and the option expires in 45 days?