Dayo is long a bear spread with strike prices 9.00 and 19.00. The ons expire in 12 months, the spot price is $12.50, the stock volatility is 0%, the risk free interest rate is 5.75% and the stock dividend rate is . Dayo delta hedges the position initially and then doesn't adjust the a hedge. One month later the stock price is still the same. How much s delta change? 0.02407 0.02721 0.02093 0.01988 It depends on whether she used put options or call options for the initial sition.

Dayo is long a bear spread with strike prices 9.00 and 19.00. The ons expire in 12 months, the spot price is $12.50, the stock volatility is 0%, the risk free interest rate is 5.75% and the stock dividend rate is . Dayo delta hedges the position initially and then doesn't adjust the a hedge. One month later the stock price is still the same. How much s delta change? 0.02407 0.02721 0.02093 0.01988 It depends on whether she used put options or call options for the initial sition.

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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Carmax, Inc. common stock currently sells for $95.89 per share, and the standard deviation of returns is 44.58%. A call option with a strike price of $95.00 is currently trading on the market. The option expires in three months, and the risk - free rate of return is 4.4%. Carmax does not pay a dividend. Carmax's gamma (\Gamma) is: Group of answer choices 0.01829 0.00528 0.01723 0.01866
A stock sells for $125. A call option on the stock has an exercise price of $110 and expires in 3 months. If the interest rate is 0.15 and the standard deviation of the stock’s return is 0.30. What would be the price of a put option on the same stock with an exercise price of $140 and the same time (3 months) until expiration? Show all workings. (See Appendix for the Cumulative Normal Distribution Table) b) Let the spot rate be Yen 100 / $ and the 3-month forward rate be Yen 99/$. Compute the interest rate differential between the U.S. and Japan at which interest rate parity will hold true.
Carmax, Inc. common stock currently sells for $106.45 per share, and the standard deviation of returns is 44.91%. A call option with a strike price of $95.00 is currently trading on the market. The option expires in three months, and the risk-free rate of return is 2.6%. Carmax does not pay a dividend. Carmax's gamma (Γ) is: Group of answer choices 0.00391 0.01353 0.01526 0.01541
A stock currently trades at $40, and the volatility of its return is 10%. The continuously compounded rate of interest is 12%. Consider a call option struck at $45, with 75 days to expiration (recall that there are 251 trading days in one year). a) What is the price of the option (rounded to the nearest cent)? Answer = $ . b) What is the option's delta (rounded to four decimal places)? Answer = . c) Use your answer from (b) to estimate the value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ . d) What is the exact value of the option tomorrow, assuming the stock is trading at $40.95 at that time? Answer = $ . [Note: Use software to compute the values of the normal CDF, not the table.]
IBM stock currently sells for 84 dollars per share. Over 8 months the price will either go up by 7.5 percent or down by -3.0 percent. The risk-free rate of interest is 4.5 percent continuously compounded. A call option with strike price 83 and maturity of 8 months has a delta of 0.82766. What is the value of this call option? 0.62579 O2.6708 O4.0788 2.9324 O4.3788
Muller's Investigative Services has stock is trading at $45 per share. The stock is expected to have a year-end dividend of $3 per share (D₁ = $3), and it is expected to grow at some constant rate, g₁, throughout time. The stock's required rate of return is 12% (assume the market is in equilibrium with the required return equal to the expected return). What is your forecast of g₁? Do not round intermediate calculations. Round the answer to two decimal places
Consider a non-dividend paying stock that is currently trading at Rs.540. You entered into a short forward contract some time back at a strike price of Rs.595. The continuously compounded risk-free rate is 8% per annum and currently it has 9 months to maturity. The current forward price should be __________and value of the forward contract is_______. Rounded off to three decimal places.
a) Draw the payoff patterns of i) a long call position ii) a long put position. b) A stock is currently trading at $155. The volatility of the stock price is 20% per annum and the risk-free rate is 8% per annum. What is the Black-Sholes price of a one-year call option with a strike price equal to $160? Assume that the stock will pay no dividends.
Visa, Inc. (V) has a beta of 1.08, is selling for $56.72, and will pay a $2.35 dividend at the end of the year. If the stock is priced at $57.15 at year-end, it is __________, so __________ it. Assume the risk-free rate is 3.05%, and the expected market return is 3.92%. A. underpriced / sell B. underpriced / buy C. overpriced / sell D. fair-valued / hold
b. Your broker suggests two stocks as good to purchase; stock GAAB and stock PUFF. The two stocks each pay a GHS 1.5 dividend that is growing annually at 9 percent. Stock GAAB has a beta of 1.4 while stock PUFF's beta is 0.85. Which stock is more volatile and why? If treasury bills yield 8 percent and you expect the market return to rise by 15.5 percent, what is your risk-adjusted required rate of return? i. ii.
The risk-free rate is 3% per annum with continuous compounding. The price of stock LUV is $85, and its stock-price volatility is 25% per annum. LUV currently does not pay a dividend. What is the price of a 3-month at-the-money American call on LUV? A.$2.94 B.$3.67 C.$5.06 D.$4.54
The risk-free rate is 1.54% and the market risk premium is 8.58%. A stock with a β of 1.39 just paid a dividend of $1.30. The dividend is expected to grow at 22.14% for five years and then grow at 3.47% forever. What is the value of the stock? Don't use any AI otherwise I will give.......

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