Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- A put option that expires in six months with an exercise price of $65 sells for $4.45. The stock is currently priced at $61, and the risk-free rate is 3.9 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Call pricearrow_forwardA put option that expires in six months with an exercise price of $65 sells for $4.45. The stock is currently priced at $61, and the risk-free rate is 3.9 percent per year, compounded continuously. What is the price of a call option with the same exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) X Answer is complete but not entirely correct. Call price $ 1.68 Xarrow_forwardAn option has a 40% (actuarial) chance of paying $7.03 when the underlying asset increases by 6.3% and a 60% (actuarial) chance of paying $8.67 if the underlying asset declines by 10.8%. Given that the risk-free rate is 3.6% p.a. and there are 3 months until this option is to expire, what is the risk-neutral price of this option? Answer:arrow_forward
- A call option currently sells for $9.25. It has a strike price of $45 and six months to maturity. A put with the same strike and expiration date sells for $7.50. If the risk-free interest rate is 6.3 percent, what is the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Current stock pricearrow_forwardThe current stock price of Chocho inc is $125. You expect the stock price a year from now to be either $134 or $86 with equal probabilities. The interest rate at which investors can borrow is 13%. Using the binomial opm, what should be the price (premium) of a call option with an exercise price of $115.00 and an expiration date one year from now?arrow_forwardThe price of a European call option on a stock with a strike price of $50.9 is $5.6. The stock price is $40.1, the continuously compounded risk-free rate (all maturities) is 5.2% and the time to maturity is one year. A dividend of $0.6 is expected in six months. What is the price of a one-year European put option on the stock with a strike price equal to the call's strike price? Please state the formula and steps, thanksarrow_forward
- An option has strike price of $9 and 12 months to expiry. The current price of the underlying share is $35 and its volatility (sigma) is 23%. The riskfree rate of interest is 4% per annum. Calculate d2 for this option. [your answer should have at least 2 decimal places]arrow_forwardSuppose the call option of Tesla company has an exercise price of $200 and expires in 90 days. Assume the current price of Tesla stock is $240, with a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. First, using the Black-Scholes formula, compute the price of the call. And then use put-call parity to compute the price of the put with the same strike and expiration date. Based on put-call parity, what should be the put option price? $ 2.65 $ 1.78 $ 3.69 $ 4.22 None of the abovearrow_forward1) In a one-period binomial model, assume that the current stock price is $100, and that it will rise to $130 or fall to $70 after one month. The gross one month risk - free rate is 1.02 %. Using risk neutral pricing, what is the price of a 100- strike one-month call option? Round your calculaton for q and 1 - q to four (4) decimal places. a. $14.90 b. $14.71 c. $15.05 d. $15.69 2) In a one-period binomial model, assume that the current stock price is $100, and that it will rise to $120 or fall to $80 after one month. The gross one month risk - free rate is 1.03%. Using risk neutral pricing, what is the price of a 100-strike one-month put option? Round your calculaton for q and 1 - q to three (3) decimal places a. $8.00 b. $8.25 c. $8.50 d. $8.75arrow_forward
- Assume that K=61, St =65, t = 0.25 (i.e. time to expiry is 3 months), and the risk-free rate is 0.04. The current price of the put option is p = 4. If the price of the call option is 7.17, describe the arbitrage that would be possible, and calculate the profit that would result.arrow_forwardThe market price of JS stock is currently $30. It is known that at the end of three months it will be either $33 or $27. The risk-free interest rate is 8% per annum with continuous compounding. (a) Use a one-step binomial tree to calculate the value of a three-month European put option on the JS stock with a strike price of $31? Use no-arbitrage arguments (you need to show how to set up the riskless portfolio). (b) Use the same one-step binomial tree and your results from (a) to determine the price of a three-month American put option on the JS stock with a strike price of $31arrow_forward
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