Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Chapter 15, Problem 13PS
The common stock of the R.U.I.T. Corporation has boon trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is
a. What would be a simple options strategy to exploit your conviction about the stock price’s future movements?
b. How far would the price have to move in either direction for you to make a profit on your initial investment?
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The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, but you are convinced it is
going to break far out of that range in the next 6 months. You do not know whether it will go up or down, however. The current price of
the stock is $120 per share, and the price of a 6 month call option at an exercise price of $120 is $8.89.
Required:
a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month put option on P.U.T.T. stock at an exercise price of
$120? (The stock pays no dividends.)
b. What would be a simple options strategy to exploit your conviction about the stock price's future movements? How far would it
have to move in either direction for you to make a profit on your initial investment?
Complete this question by entering your answers in the tabs below.
Required A Required B
If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month put option on P.U.T.T. stock at an exercise…
The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, but you are convinced it is
going to break far out of that range in the next 6 months. You do not know whether it will go up or down, however. The current price of
the stock is $130 per share, and the price of a 6 month call option at an exercise price of $130 is $10.85.
Required:
a. If the semiannual risk-free interest rate is 5%, what must be the price of a 6-month put option on P.U.T.T. stock at an exercise price of
$130? (The stock pays no dividends.)
b. What would be a simple options strategy to exploit your conviction about the stock price's future movements? How far would it
have to move in either direction for you to make a profit on your initial investment?
Complete this question by entering your answers in the tabs below.
Required A Required B
If the semiannual risk-free interest rate is 5%, what must be the price of a 6-month put option on P.U.T.T. stock at an exercise…
A.K. Scott’s stock is selling for $37 a share. A 3-month call on this stock with a strike price of $38 is priced at $2. Risk-free assets are currently returning 0.28 percent per month.
a) What should be the price of a 3-month put option on this stock with a strike price of $38?
b) Which of the two options is currently in the money and does that accord with your conclusions about their relative prices?
Chapter 15 Solutions
Essentials Of Investments
Ch. 15.2 - Plot the rate of return to the call-plus-bills...Ch. 15.2 - Prob. 2EQCh. 15 - Prob. 1PSCh. 15 - Prob. 2PSCh. 15 - Prob. 3PSCh. 15 - Prob. 4PSCh. 15 - Prob. 5PSCh. 15 - Prob. 6PSCh. 15 - Prob. 7PSCh. 15 - The following diagram shows the value of a put...
Ch. 15 - You are a portfolio manager who uses Options...Ch. 15 - An investor purchases a stock for 38 and a put for...Ch. 15 - ll. Imagine that you are holding shares of stock,...Ch. 15 - Prob. 12PSCh. 15 - The common stock of the R.U.I.T. Corporation has...Ch. 15 - 14. The common stock of the C.A.L.L. Corporation...Ch. 15 - Prob. 15PSCh. 15 - Prob. 16PSCh. 15 - Prob. 17PSCh. 15 - Prob. 18PSCh. 15 - Prob. 19PSCh. 15 - In what ways is owning a corporate bond similar to...Ch. 15 - Prob. 21PSCh. 15 - Consider the following options portfolio: You...Ch. 15 - Consider the following portfolio. You write a put...Ch. 15 - A put option with strike price 300 on the Acme...Ch. 15 - You buy a share of stock, mite a one-year call...Ch. 15 - Joe Finance has just purchased a stock-index fund,...Ch. 15 - You write a call option with X=50 and buy a call...Ch. 15 - Devise a portfolio using only call options and...Ch. 15 - Prob. 29CCh. 15 - Prob. 1CPCh. 15 - Prob. 2CPCh. 15 - Prob. 3CPCh. 15 - Prob. 4CPCh. 15 - Prob. 5CPCh. 15 - Prob. 1WM
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