The stock of Lead Zeppelin, a metal manufacturer, currently sells for $69 and has an annual standard deviation of 42 percent. The risk-free rate is 3.1 percent. What is the value of a put option with a strike price of $70 and 51 days to expiration? (Use 365 days in a year.Do not round intermediate calculations. Round your answer to 2 decimal places.)Value of a put option

Current price $69Volatility = 42%Risk free rate = 3.1%Strike price = $70High price $69*(1+0.42) =…

Answered: The stock of Lead Zeppelin, a metal…

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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The stock price is currently $30. Each month for the next two months it is expected to increase by 8% or reduce by 10%. The risk-free interest rate is 5%. Use a two-step tree to calculate the value of a derivative that pays off [max(30 — St； 0)]2, where St is the stock price in two months? If the derivative is American-style, should it be exercised early?
A stock sells for $125. A call option on the stock has an exercise price of $110 and expires in 3 months. If the interest rate is 0.15 and the standard deviation of the stock’s return is 0.30. What would be the price of a put option on the same stock with an exercise price of $140 and the same time (3 months) until expiration? Show all workings. (See Appendix for the Cumulative Normal Distribution Table) b) Let the spot rate be Yen 100 / $ and the 3-month forward rate be Yen 99/$. Compute the interest rate differential between the U.S. and Japan at which interest rate parity will hold true.
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A put option is currently selling for $5.8. It has a strike price of $65 and seven months to maturity. The current stock price is $71. The risk-free rate is 4.8 percent, and the stock will pay a $3.1 dividend in two months. What is the price of a call option with the same strike price? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Price of a call option
Suppose an investor sells 100 stocks by short selling for 6 months, the stock price is 30 yuan, and the annual interest rate of 6 months is fixed at 3%. How can I use forward contracts to avoid risks? What is the execution price? Please analyze if the stock price rises to 35 yuan or falls to 25 yuan after 6 months of hedging, what are the losses of this investor?
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]
The current stock price of Chocho inc is $120. You expect the stock price a year from now to be either $160.00 or $60.00 with equal probabilities. The interest rate at which investors can borrow is 10%. 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?
What is the value of a put option if the underlying stock price is $47, the strike price is $40, the underlying stock volatility is 52 percent, and the risk-free rate is 5.5 percent? Assume the option has 150 days to expiration. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.) X Answer is complete but not entirely correct. Value of a put option $ 7.00
The stock price of Heavy Metal (HM) changes only once a month: either it goes up by 24% or it falls by 20.7%. Its price now is $48. The interest rate is 1.2% per month. What is the value of a one-month call option with an exercise price of $48? What is the option delta? The payoffs of the call option can be replicated by buying shares of stock and borrowing. What amount should be invested in stock and what amount must be borrowed? What is the value of a two-month call option with an exercise price of $49? What is the option delta of the two-month call over the first one-month period?
A non-dividend paying asset is current priced at $25 and the risk-free interest rate is 8% per annum. Today, you enter into a six-month futures contract to buy a unit of this asset. Three months from now the underlying price has fallen to $18 (but note that the interest rate has not moved). Which of the answers below is closest to the fall in the futures price? Use discrete discounting. Question 7Answer a. $6.50 b. $5.50 c. $7.50 d. $4.50
The current stock price is $10. In each of the next two years, the stock price can either go up by $2 or go down by $2. The stock pays no dividends. The one-year risk-free interest rate is 5% and will remain constant during this two-year period. a) Using the Binomial Model of option pricing, calculate the price of a two-year call option on the stock with a strike price of $13. b) Using Risk Neutral valuation calculate the price of two-year put option on the stock with a strike price of $7.
The following information is given: Time to expiration 1 year. Standard deviation 40% per year. Exercise price $72. Stock price $72. Risk free rate 4% a year. Use the Black–Scholes formula to find the value of the calloption. What is the value of the put option with the same exercise price and time to expiration? What is the value of the call option if time to expiration is 3 years? What is the value of the call option if the standard deviation is 20%? What is the value of the call option if the exercise price is $90? What is the value of the call option if the current stock price is $50? What is the value of the call option if the risk-free rate is 8%?

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