ABC Company's current stock price is $100. The risk-free rate is 4%. 38. The payoff to the holder of a call option on ABC with an exercise price of $200 is closest to: A. $100 if stock price at option expiration equals $200 B. Zero if stock price at option expiration equals $100 C. -$40 if stock price at option expiration equals $160

ABC Company's current stock price is $100. The risk-free rate is 4%. 38. The payoff to the holder of a call option on ABC with an exercise price of $200 is closest to: A. $100 if stock price at option expiration equals $200 B. Zero if stock price at option expiration equals $100 C. -$40 if stock price at option expiration equals $160

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

See similar textbooks

Similar questions

Brighton Memory’s stock is currently trading at $50 a share. A calloption on the stock with a $35 strike price currently sells for $21.What is the exercise value of the call option? ($15.00) What is thetime value? ($6.00)
Assume a stock is selling for GH¢48.50 with options available at 40, 50, and 60 strike prices.The 50 call option price is at 2.75.a. What is the intrinsic value of the 50 call?b. Is the 50 call in the money?c. Are the 40 and 60 call options in the money?
39. ABC Company's current stock price is $100. The risk free rate is 4%.The payoff to the holder of a put option on ABC with an exercise price of $200 is closest to a.$100 if stock price at option expiration equals $200 b.zero if stock price at option expiration equals $100 c.$40 if stock price at option expiration equals $160
If a particular stock does not pay dividends and is currently priced at $24 per share, what should be the price of a call option with a maturity of one year and a strike price of $24.5 if put options with the same features currently cost $2? Assume a risk-free rate of 2%. (use 5 decimal places)
A stock with a current market price of $50 has an associated put option priced at $6.5. This put option has an exercise price of $48. The put option has an intrinsic value of ______ and a time value of ______. Select one: a. $0; $4.5 b. -$2; $8.5 c. $2; $4.5 d. $2; $6.5 e. $0; $6.5
uppose an American put is trading for $16.50and an American call is trading for $15, whereboth options have identical terms. The underlying stock price is $99, and the exercise price is$100. The annual risk - free interest rate is 5 per cent, and the time to expiration for both optionsis one year. Assuming that the stock pays no dividends, identify the appropriate arbitrage trading strategy
A) What is the price of a $60 strike put? Assume S = $63.75, σ = 0.20, r = 0.055, the stock pays no dividend and the option expires in 50 days? B) What is the price of a $25 strike call? Assume S = $23.50, σ = 0.24, r = 0.055, the stock pays a 2.5% continuous dividend and the option expires in 45 days?
2. The current market price of a share of AT&T stock is $50. If a call option on this stock has a strike price of $45, the call: A) B) C) D) E) is out of the money. is in the money. sells for a higher price than if the market price of AT&T stock is $40. a and c. b and c.
5) The current price of UCD Inc. is $15 per share; put options and call options on the stock both have a strike price of $15 and are selling for $0.75 per option. a) Suppose on the expiration date the price of UCD Inc. ends up being $18 per share. What is the profit/loss on a portfolio that has 1 share of stock and a long 1 put option? What about one that has 1 share of stock and is a short 1 call option? b) Suppose someone had bought 50 call options and the price ends up being $18 per share. What would be the profit/loss on that?
Suppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot diagrams for a forward contract on XYZ stock with a forward price of $55. (b) Is there any advantage to investing in the stock or the forward contract? Why? (c) Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?
1. ABC Corp has a stock price of $100 and a one-year Option with a strike price of $105. Assuming an upper stock price of $130 and a lower stock price of $80, and an interest rate of 5%. a. What is the premium, A, and B for a call? b. What is the premium, A, and B for a put? 2. The Widget Company has a stock price of $100 and a one-year option with a strike price of $95. Assuming an upper stock price of $130 and a lower stock price of $80, and an interest rate of 8%. a. Verify that the price of the call is $18.148.
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 the risk-free rate is zero. What is the initial value of the call option? Choose the right answer: a. $2 b. $3 c. $1.6 d. $2.4

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS