ABC stock is currently trading at 100. In the next period, the price will either go up by 10% or down by 10%. The risk-free rate of interest over the period is 5%. What is the delta for the put option on ABC for a strike 100? +0.67 -0.5 +0.5
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- Suppose that the current price of Roblox Corporation common stock is (RBLX) is $100. If the price of RBLX will be either $150 or $50 one year from now, what is the price of a call option with a strike price of $120 expiring one year from now? Assume that the current risk free rate is 1%. What is the risk neutral probability of the stock being $150 one year from now?Problem 1 Suggest two different portfolios that produce the payoff diagram as in the graph below. Both portfolios may contain any amount of risk-free borrowing or lending, and the underlying stock. Portfolio 1 may contain call options but no put options. Portfolio 2 may contain put options but no call options. Assume the risk-free rate is rf = 10%. 25 20 15 10 5 10 15 20 25 30 35 40 -5 -10 -15 Problem 2 Suppose that a stock is currently trading at $60 per share, and the stock price can only take two possible values one year from now: it can either go up by 25% or down by 20%. The annual risk-free rate is 4%. Assume that the stock pays no dividends. You are interested in pricing an European put option on this stock. The option has a strike price of $66, and its maturity date is exactly one year from now. a) What is the payoff on the put option if the stock price goes up by 25%? b) What is the payoff on the put option if the stock price goes down by 20%? c) What is the price of the put…The price of a share follows the geometric Brownian motion with parameters µ = 0.2 and σ = 0.18. Presently, the share’s price is £38. Consider a call option having one year until its expiration time and having a strike price of £40. The continuously compounded interest rate is 5%. (a) What is the risk-neutral price C of this call option?
- Suppose that shares of FC Inc. are trading at $100. Consider an American put option withstrike price 110. The option matures two periods from now and it pays no dividends. The price can go upby 15% or down by 10% in each period. What is the price of the option today? The risk-free rate is 7%.A stock sells P110. A call option on the stock with an exercise price of P105 and expires in 43 days. If the interest rate is 0.11 and the standard deviation of the stock's return is 0.25, what is the price of the CALL OPTION according to the Black-Scholes Model? A. P6.92 B. P8.05 C. P7.68 D. P6.88Suppose the value of the S&P 500 stock index is currently 2,000.a. If the 1-year T-bill rate is 3% and the expected dividend yield on the S&P 500 is 2%, what should the 1-year maturity futures price be?b. What if the T-bill rate is less than the dividend yield, for example, 1%?
- A stock is currently priced at $74 and will move up by a factor of 1.20 or down by a factor of .80 over the next period. The risk-free rate of interest is 4.2 percent. What is the value of a call option with a strike price of $75?A power option pays off [max(S₁ - X),01² at time T where ST is the stock price at time T and X is the strike price. Consider the situation where X = 26 and T is one year. The stock price is currently $24 and at the end of one year it will either $30 or $18. The risk-free interest rate is 5% per annum, compounded continuously. What is the risk- neutral probability of the stock rising to $30? 0.500 0.603 0.450 None of the aboveSuppose the value of the S&P 500 stock index is currently 2,400. a. If the 1-year T-bill rate is 6% and the expected dividend yield on the S&P 500 is 4%, what should the 1-year maturity futures price be? Futures price b. What if the T-bill rate is less than the dividend yield, for example, 1%? The T-bill rate is less than the dividend yield, then the futures price should be less than the spot price.
- Suppose that a stock price is currently 35 dollars, and it is known that four months from now, the price will be either 51 dollars or 29 dollars. Find the value of a European call option on the stock that expires four months from now, and has a strike price of 39 dollars. Assume that no arbitrage opportunities exist and a risk-free interest rate of 10 percent.Answer =dollars.Suppose that a stock price is currently 51 dollars, and it is known that one month from now, the price will be either 6 percent higher or 6 percent lower. Find the value of an American call option on the stock that expires one month from now, and has a strike price of 49 dollars. Assume that no arbitrage opportunities exist, and a risk free interest rate of 10 percentA stock with a current price of $43 will either move up by a factor of 1.20 or down by a factor of 0.80 each period over the next two periods. The risk-free rate of interest is 3 percent. What is the current value of a call option with a strike price of $45?