It is a single question with six parts.....I need all six parts.....Don't attempt if you will not solve all six parts... As a financial analyst at JPMorgan Chase investments, you are evaluating European call options and put options using Black Scholes model. SupposeBMI's stock price is currently $65. The stock's standard deviation is 8% per month and the risk-free interest rate is 0.9% per month. The options withexercise price of $66 matures in 120 days. To find the value of options and options delta, you went to the website www.optionseducation.org and found thefollowing information:CallOption Value 4.7540Delta 0.5816Gamma 0.0378Theta -0.0265Vega 0.1456Rho0.1087CallImplied VolatilityOption PricePut3.4606-0.41840.0378-0.00780.1456-0.1008Vola %0.00Calculate Please answer the following questions.a. What is the annualized interest rate?(sample answer: 8.25%)b. What is the annualized standard deviation?c. What is the Call value?(sample answer: $7.65)d.What is the Put value?(sample answer: $7.65)e.If the stock price goes up by one dollar, how much will the call option change in price?1.If the stock price goes up by one dollar, how much will the put option change in price?(sample answer: 8.25%)(sample answer: 0.55 or -0.55)(sample answer: 0.55 or -0.55)

The given details related to the call and put options on a stock are:

Please answer the following questions. a. What is the annualized interest rate? (sample answer: 8.25%) b. What is the annualized standard deviation? c. What is the Call value? (sample answer: $7.65) d.What is the Put value? (sample answer: $7.65) e.If the stock price goes up by one dollar, how much will the call option change in price? 1.If the stock price goes up by one dollar, how much will the put option change in price?[ (sample answer: 8.25%) (sample answer: 0.55 or -0.55) (sample answer: 0.55 or -0.55)

Please answer the following questions. a. What is the annualized interest rate? (sample answer: 8.25%) b. What is the annualized standard deviation? c. What is the Call value? (sample answer: $7.65) d.What is the Put value? (sample answer: $7.65) e.If the stock price goes up by one dollar, how much will the call option change in price? 1.If the stock price goes up by one dollar, how much will the put option change in price?[ (sample answer: 8.25%) (sample answer: 0.55 or -0.55) (sample answer: 0.55 or -0.55)

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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Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Anderson, Inc. Nathan's Bakeries Z-man Electronics Delta Vanlines All of the stocks Beta Expected Return Anderson, Inc. 0.90 10.5% Delta Vanlines 1.10 13.0% 1.60 16.0% Firm Nathan's Bakeries Z-man Electronics 2.15 19.0%
Write and describe the Black-Scholes formulas for pricing European call and put options. The stock price three months from the expiration of an option is R1040, the exercise price of the option is R1000, the risk-free interest rate is 11% per annum, and the volatility is 22% per annum. Calculate the prices of European call and put options.
An investor decides to implement a STRADDLE using put options using the following data . The price of stock today is $ 59 , time frame is 6months , the staddle is constructed using a put and a call option with a strike price of $ 61 . The call cost $ 4 and put costs $ 3 . a ) What is the profit ( % ) if in 6 months , if the stock price is at $ 70 b ) What is the profit ( % ) if in 6 months , if the stock price is at $ 60 c ) At what stock price in the future , the investor will make the least / min profit ? d ) Why do investors implement / use this strategy ? For what reason ?
The current price of a stock is $18. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. X Open spreadsheet Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. $
The current price of a stock is $20. In 1 year, the price will be either $28 or $15. The annual risk-free rate is 7%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Find the price of a call option on the stock that has a strike price is of $25 and that expires in 1 year. (Hint: Use daily compounding.) Assume 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.
You Consider a stock with a price of $50 that is expected to increase by 6% or decrease by 8% each month over the next two months. Having a risk-free rate at 3% per year with continuous compounding, calculate the value of a two-month European put option with a strike price of $55. Repeat your calculations for a two-month American put option with a strike price of $55. Show clearly all your calculations and results with the use of the relevant equations and graphs. Discuss your investment decision in each case separately.
Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Firm Beta Expected Return Anderson, Inc. 0.90 10.5% Delta Vanlines 1.25 13.0% Nathan's 1.60 16.0% Bakeries Z-man 1.90 19.0% Electronics O All of the stocks O Z-man Electronics O Nathan's Bakeries O Delta Vanlines O Anderson, Inc.
Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Firm Beta Expected Return Anderson, Inc. 0.90 10.5% Delta Vanlines 1.25 13.0% Nathan's Bakeries 1.60 16.0% Z-man Electronics 1.90 19.0%
Your broker has developed a list of firms, their betas, and the return he expects the stock to yield over the next twelve months (labeled "Expected Return"). You have estimated that the risk-free rate is 5% and the return to the market will be 12%. Assuming that CAPM is correct, which stock should you purchase? Expected Return 10.5% Delta Vanlines 1.25 13.0 % 1.60 16.0% Firm Beta Anderson, Inc. 0.90 Nathan's Bakeries Z-man Electronics O Delta Vanlines 1.90 19.0% All of the stocks, Anderson, Inc. O Nathan's Bakeries OZ-man Electronics
The Black-Scholes model is used by Bulldogs Inc. to value call options on the stock of National Inc. The following information was determined by the analyst:· The share price is P30.· The price of the option is at P32.· The risk-free rate is 3%.· The option matures in 6 monthsIn the formula of the current value of the call option under the Black-Scholes model, what is the exponent of “e” be? -0.015 0.15 0.25 -0.055
Suppose that on 27 October 2022, Wall Street Journal in New York presents the following price for 27 March 2023 call options on Microsoft stock (in $ USA) strike 75 80 85 price 11 7.96 5.5 while the annual interest rate is 4% per year. On this date (27 October 2022) the Microsoft stock was trading at $81.625. Suppose we decide that the volatility of the market is 30%. Should you buy the call option as the European one with strike price $80? Justify your answer.
Adam Smith is a portfolio manager with Point72 Investments, a U.S.-based asset management firm. Smith is considering using options to enhance portfolio returns and control risk. He asks his junior analyst, Tommy Hilfiger, to help him. Hilfiger collected the current market prices and data of selected instruments related to Lotus stock in the following Table. European call option on Lotus stock European put option on Lotus stock Lotus stock price Time to expiration of options in month $8 $4 $60 3 $55 10% $1.50 Exercise price of options Risk-free rate Dividend to be paid in 3 months According to the table, What will be the arbitrage profit per share without considering the transaction cost? (use this put call parity for the calculation: C + D + Ke-IT = p + S0)

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