Algebra and Trigonometry (6th Edition)
Algebra and Trigonometry (6th Edition)
6th Edition
ISBN: 9780134463216
Author: Robert F. Blitzer
Publisher: PEARSON
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1. (Pricing a forward contract with dividends)
The current price of silver is $206 per ounce. The storage cost is $1 ounce per year, payable quarterly in advance.
Assuming a constant annual interest rate of 9% compounded quarterly, what is the theoretical forward price of
silver for delivery in 9 months?
Please submit your answer rounded to the nearest integer - for example, if your answer is 19.8, round it to either
20.
Enter answer here
2. (Pricing Call Options)
Consider a 1-period binomial model with R = 1.05, So = 50, u = 1/d = 1.08. What is the value of a European
call option on the stock with strike K = 52, assuming that the stock does not pay dividends?
Please submit your answer rounded to two decimal places. So for example, if your answer is 5.489 then you should
submit an answer of 5.48 or 5.49.
Enter answer here
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Transcribed Image Text:1. (Pricing a forward contract with dividends) The current price of silver is $206 per ounce. The storage cost is $1 ounce per year, payable quarterly in advance. Assuming a constant annual interest rate of 9% compounded quarterly, what is the theoretical forward price of silver for delivery in 9 months? Please submit your answer rounded to the nearest integer - for example, if your answer is 19.8, round it to either 20. Enter answer here 2. (Pricing Call Options) Consider a 1-period binomial model with R = 1.05, So = 50, u = 1/d = 1.08. What is the value of a European call option on the stock with strike K = 52, assuming that the stock does not pay dividends? Please submit your answer rounded to two decimal places. So for example, if your answer is 5.489 then you should submit an answer of 5.48 or 5.49. Enter answer here
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