You purchase a call option for $6.48 with 20 weeks to expiration on a stock you expect toincrease 40.00%. The strike price of the option is $67.50The 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 youroptions trade as a percent (or decimal)?Use these values as a part of your calc's:N(d1) 0.98806N(D2) 0.98218O 339.46%O 309.34%362.74%325.62%O 378.37%

An option is an agreement between two parties granting one the opportunity to purchase or sell a…

Answered: If the stock rises exactly as you…

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

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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%

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