Roslin Robotics stock has a volatility of 36% and a current stock price of $58 per share. Roslin pays no dividends. The risk-free interest is 6%. Consider a one-year call option with a strike price of $58 and suppose the call option is not available for trade in the market. You would like to replicate a long position in 1,000 call options. a. What portfolio should you hold today? b. Suppose you purchase the portfolio in part (a). If Roslin stock goes up in value to $60 per share today, what is the value of this portfolio now? If the call option were available for trade, what would be the difference in value between the call option and the portfolio (expressed as a percentage of the value of the call)? c. After the stock price change in part (b), how should you adjust your portfolio to continue to replicate the options? (Note: Make sure to round all intermediate calculations at least four decimal places.) a. What portfolio should you hold today? You should purchase shares of Roslin's stock and borrow $- (Round both answers the nearest integer.)

Roslin Robotics stock has a volatility of 36% and a current stock price of $58 per share. Roslin pays no dividends. The risk-free interest is 6%. Consider a one-year call option with a strike price of $58 and suppose the call option is not available for trade in the market. You would like to replicate a long position in 1,000 call options. a. What portfolio should you hold today? b. Suppose you purchase the portfolio in part (a). If Roslin stock goes up in value to $60 per share today, what is the value of this portfolio now? If the call option were available for trade, what would be the difference in value between the call option and the portfolio (expressed as a percentage of the value of the call)? c. After the stock price change in part (b), how should you adjust your portfolio to continue to replicate the options? (Note: Make sure to round all intermediate calculations at least four decimal places.) a. What portfolio should you hold today? You should purchase shares of Roslin's stock and borrow $- (Round both answers the nearest integer.)

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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