An investor owns a put option with a strike price of $ 20, the premium paid was $ 2. The stock price on the option expiration date is $ 25, which is the below statements is correct? A ) The loss on the option is$7 B The option should be allowed to lapse C The intrinsic value of the option is - $2 D The profit on the option is $ 3

An investor owns a put option with a strike price of $ 20, the premium paid was $ 2. The stock price on the option expiration date is $ 25, which is the below statements is correct? A ) The loss on the option is$7 B The option should be allowed to lapse C The intrinsic value of the option is - $2 D The profit on the option is $ 3

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter18: Derivatives And Risk Management

Section18.A: Valuation Of Put Options

Problem 1P

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Question 5: Suppose that a March call option to buy a share for $50 costs $2.50 and is held until March. Under what circumstances will the holder of the option make a profit? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.Plz explain it
Question 4 Consider the following: your purchased a put option on JPM two months ago, with a strike price for the option of $138, and the option expires today. Show work for all parts requiring computation. Suppose the stock price is $152. What is the exercise value? In general, how is the value of a put option affected by time (+/-/None), underlying asset volatility (+/-/None), and the current asset price (+/-/None)?
Question 5 An investor purchases a call option with an exercise price of $55 for $2.60. The same investor sells a call on the same security with an exercise price of $60 for $1.40. At expiration, 3 months later, the stock price is $55.75. All other things being equal and given an annual interest rate of 4.0%, what is the net profit or loss to the investor?
6- A put option (with shares as the underlying asset) was originally purchased for $1.44 and is now trading for $2.82. The exercise price is $34 and the underlying share is currently trading for $31.64. What is the intrinsic value of the option? a. $2.82 b. $0.00 c. $2.36 d. $1.44
An investor owns a put option with a strike price of $ 20, the premium paid was $ 2.The stock price on the option expiration date is $ 25, which is the below statements is correct? The intrinsic value of the option is-$2 The loss on the option is $ 7 The option should be allowed to lapse The profit on the option is $ 3
QUESTION 5 Suppose company XYZ's stock is trading at $53.86. You currently hold a put option with a strike price of $69.95 and premium on the option was $14.39. If today is the expiration date, how much did you gain or lose on the option? (Put the answer in as a negative if it's a loss.)
QUESTION 30 Johnson & Johnson (ticker:JNJ) is traded at $172.21 per share when Nancy sold a call option today. The call premium is $3.05 and the exercise price is $180 The option will be expired on Jan. 20, 2024. a. What is Nancy's expectation about JNJ's price between now and expiration date? Also, state reasons why sellling a call is beneficial given her expectation of the price movement. b. What are Nancy's maximum profit and maximum loss? c. Show the profit/loss if, at the expiration date, the JNJ price is (1) $150, (2) $182, (3) $190. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph ABC ✔ ✓ Π "Ω Θ Arial 田く HH = 10pt 田田田 Ev A V 田旺图 † {} Ix ४ Gô Ky Q5 + ≡≡≡≡ € € X² X₂ & >IT
Question 5 Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. a. What is the price of the option if it is a European call? b. What is the price of the option if it is a European put? c. Verify that put-call parity holds. ●
Question 5 Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. What is the price of the option if it is a European call? b. What is the price of the option if it is a European put? c. Verify that put-call parity holds. a.
23-A call option contract has a strike rate of $1.820/£ and a premium of $0.08. The spot rate on maturity is $1.920/£. Which one of the following is the gain (or) loss to the buyer of the call option? a. The buyer exercise the option and gain is $0.10/£ b. The buyer not exercise the option and loss is $0.08/£ c. The buyer exercise the option and gain is $0.02/£ d. None of the options
Question 12 A speculator may write a put option on stock with an exercise price of $15 and earn a $3 premium only if he thought O the stock price would stay below $12. O the stock price would fall below $18. O the stock price would rise above $18 or fall below $12. O the stock price would stay above $15.