If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on your options trade as a percent (or decimal)?

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
icon
Related questions
Question
You purchase a call option for $6.48 with 20 weeks to expiration on a stock you expect to
increase 40.00%. The strike price of the option is $67.50
The stock is currently priced at $67.50. Its standard deviation is 36.00%
It pays a 0.00% dividend. The risk-free rate is 4.00%
If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on your
options trade as a percent (or decimal)?
Use these values as a part of your calc's:
N(d1) 0.98806
N(D2) 0.98218
O 339.46%
O 309.34%
362.74%
325.62%
O 378.37%
Transcribed Image Text:You purchase a call option for $6.48 with 20 weeks to expiration on a stock you expect to increase 40.00%. The strike price of the option is $67.50 The stock is currently priced at $67.50. Its standard deviation is 36.00% It pays a 0.00% dividend. The risk-free rate is 4.00% If the stock rises exactly as you expect, but it takes 10 weeks, what is the gain on your options trade as a percent (or decimal)? Use these values as a part of your calc's: N(d1) 0.98806 N(D2) 0.98218 O 339.46% O 309.34% 362.74% 325.62% O 378.37%
Expert Solution
steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Risk and Return
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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