IBM stock currently sells for 49 dollars per share. Over 12 month(s) the price will either go up by 11.5 percent or down by -7.0 percent. The risk-free rate of interest is 4.5 percent continuously compounded. If you are short one call option with strike price 51 and maturity 12 months how many shares of stock must you buy to establish a delta-neutral position?
Q: 20. As a trader in a bank, you are asked to provide a 2-year FX forward quote on GBP/JP The current…
A: The theory that states that an investor will not earn arbitrage profit by making investments in…
Q: Your rich aunt gives you a high school graduation present of $190,000. Her present is in the form of…
A: Present value today that of the future value is based on time and interest rate is equivalent value…
Q: Limitations of Capital Budgeting Although capital budgeting provides a lot of insight into the…
A: We have to explain the limitations of capital budgeting techniques.
Q: The common stock of Permanent Assurance Corporation currently trades at $40.00 per share, which is…
A: Return on Equity on the stock is EPS divided by the book value per share. ROE decreases from 9% to…
Q: Fool Proof Software is considering a new project whose data are shown below. The equipment that…
A: Year 1 cash flow is calculated as follows:- Sales revenue - operating costs -{ (sales revenue -…
Q: Davis Corporation reported the following financial data for one of its divisions for the year;…
A: Financial ratios such as asset turnover, total asset turnover, or asset turns measure how well a…
Q: current balance of home is 43,000 at 6.5 % how much is needed to pay off in 11 years ?
A: The current Balance is $40,000 The interest rate is 6.5% The time period is 11 years To Find:…
Q: 9. A company borrows 1,000,000 at an annual effective discount rate of 4%. The loan is to be repaid…
A: We need to find the final payment on the borrowing as per the given information. The final payment…
Q: proximates its intrinsic value. The company has announced plans to maintain its dividend next year…
A: Expected annual rate of return is what the shareholder expected from the company and that depends on…
Q: 29. If the future is 25% more than the principal after 8 months, determine the simple interest rate.…
A: In case of the simple interest the interest amount is computed only on the initial principal amount.…
Q: The Sunland Products Co. currently has debt with a market value of $275 million outstanding. The…
A: The appropriate cost of capital refers to the minimum rate that should be received as a return by…
Q: Which form of market efficiency would most likely offer the greatest profit potential to an…
A: This is based on the theory of efficient market hypothesis (EMH). The EMH theory states that markets…
Q: The common stock of XMen Inc. had the following historic prices. Time Price of X-Tech…
A: The formula for calculating holding period return is = [(End Price - Beginning price) + Income…
Q: You have just been employed as an investment analyst in an investment bank. You took over from…
A: Honor Code: Since you have posted a question with multiple sub-parts, we will solve the first three…
Q: A design studio received a loan of $4,250 at 3.90% compounded semi-annually to purchase a camera. If…
A: The periodic payments are made at regular intervals to amortize or repay loan periodic, the payments…
Q: How much payment Z should he make on the exact time after the last regular payment has been made to…
A: We have to find the payment Z to be made on the exact time after the last regular payment has been…
Q: IBM stock currently sells for 64 dollars per share. The implied volatility equals 40.0. The…
A: A financial tactic used with call-and-put options is delta hedging. This tactic lessens the risks…
Q: Which of the following is FALSE about debt? A) Private debts include bank loans and private…
A: Several statements have been given about debt. We have to find the one that is FALSE.
Q: Find the future value of the following ordinary annuity. Periodic Payment Payment Interval Term…
A: Annuity refers to a constant and fixed amount of payment over a period of time. We can compute the…
Q: If the price of silver in England is £6.81 per ounce, what is the expected price of silver in the…
A: Price in England = 6.81 Spot exchange rate = 0.5173 Price of silver in United States = ?
Q: Apolonia Place is an office building that has recently been put up for sale. It is rented by one…
A: Given Lease remaining = 10 years Rent for 1-3 years = 300,000 per annum Rent for 4-6 years =…
Q: M stock currently sells for 100 dollars per share. The implied volatility equals 20.0. The risk-free…
A: Delta of call option indicates that how much change in price of call option will be there with…
Q: Viking Voyager specializes in the design and production of replica Viking boats. On January 1, 2021,…
A: Bonds are a source of funds. Generally, bonds are issued to the public by corporations and…
Q: A developer is pursuing a project with the following: Capital cost of project: $100,000.00 Initial…
A: According to bartelby guidelines , if question involves multiple subparts , then 1st sub 3 parts…
Q: The stock price of Company XYZ can only have 5 possible stock price (PhP10, PhP20, PhP30, PhP40 and…
A:
Q: (Related to Checkpoint 14.2) (Cost of common equity) The common stock for Oxford, Inc. is currently…
A: Last dividend (D0) = $1.71 Current price (P0) = $22.79 Growth rate (g) = 0.049 Cost of common…
Q: What force of interest is equivalent to 7.8% p.a. compounded biweekly for the next 8 years followed…
A: We have to find the force of that adequately substitutes the sequential 7.8% p.a. compounded…
Q: the APR. 1. Helen Olson needs an installment loan of $999.00. She must repay the loan in 24 months.…
A: Solution:- When an amount is borrowed, it can either be repaid as lump sum payment or in…
Q: ou purchased 850 shares of Sea Inc. common stock one year ago for $47 per share. You received a…
A: Purchase price (PP) = $47 Dividend (D) = $1.35 Sale price (SP) = $52.50 Holding period return = ?
Q: Consider the following portfolio: Long 0 puts with strike price 98.0 Short 1 puts with strike price…
A: If the buyer exercises the option, the underlying asset must be sold when the call option is sold.…
Q: 16. Shars 500 Offer Price Total Cost Net Asset Jalue Proceeds Per Share $10.80 $12.60 Dividend -B…
A: The return on investment is a measure of the efficiency of an investment in producing profits. It is…
Q: You are considering starting a new factory producing small electric heaters. Each unit will sell at…
A: Accounting Break even is the number of units to be sold such the profits are exactly zero. It is…
Q: Barclay wants to buy a car. The dealer offers a financing package consisting of a 6% APR compounded…
A: Monthly loan payment refers to the periodic repayment of loans. The monthly payment amount includes…
Q: Suppose Josh gets a $7500 gift from his family on graduation & wants to buy securities with this. He…
A: We have a margin position in long shares. We need to find the initial margin and the impact of…
Q: multi-step approach
A: Multi-step Approach:- A multi-step income statement is one that divides total revenue and expenses…
Q: If markets are Oopen strong semistrong form efficient, market prices reflect all forms of available…
A: According to the efficient market hypothesis (EMH), since existing share prices already take into…
Q: he common stock of Permanent Assurance Corporation currently trades at $40.00 per share, which is…
A: Growth is necessary for the company and to increase the value of shares the growth is necessary. But…
Q: Company 0:1 Commision Number of Purchace Price Selling vice Buy Sell ODPlot Tital Prouds Gain Shares…
A: The commission is added to cost proceeds to arrive at net cost proceeds whereas the commission is…
Q: Given: $35,000 - Cost 1.0% monthly interest ratw $7000 - downpayment 4 year loan for…
A: Solution:- When an amount is borrowed, it can either be repaid as a lump sum payment or in…
Q: You have just been employed as an investment analyst in an investment bank. You took over from…
A: The amount that a present investment will gain in value over time when kept in a compound interest…
Q: Consider the following lotteries L1: 30% chance of winning £100, 30% chance of winning £300, 40%…
A: Three alternatives have been given. We have to find the one that stochastically dominates the other.
Q: Using the standard deviation of returns as a proxy for the total risk, by how much would the total…
A:
Q: 19. Consider the following two projects with a cost of capital of 15%. Only one can be chosen.…
A: Given Cost of Capital (r) = 15% Project A - Investment (I) = $550,000 Profit in first year =…
Q: Which of the following are not assumptions of technical analysis? History tends to repeat itself…
A: The fundamental analysis is the analysis of balance sheet and income statement of the company and…
Q: If you own 19,000 shares of stock of Nike and it pays a dividend of $0.24 per share, then what is…
A: Number of shares (n) = 19,000 Dividend per share (D) = $0.24 Total dividend = ?
Q: Which investment will give you the higher future value in 5 years? Investment 1: You deposit $100…
A: Given: Given: Particulars Investment 1 Investment 2 Payment (PMT) $100 $300 Years 5 5…
Q: Use the following amortization chart: Selling price of home Down payment Principal (loan) Rate of…
A: Mortgage loans by the equal and fixed monthly payments and these monthly payments carry the payment…
Q: Jamie needs a new roof on her house. The cash cost is $5600. She decides to finance the project by…
A: If an individual takes a loan from the bank, It is the individual's responsibility to pay the…
Q: You have been asked to develop a pro forma statement of cash flow for Betts Distribution Center, an…
A: Base rent per square feet = $7 Number of square feet = 230,000 Total base rent =…
Q: Find the interest rate of $8, 000 accumulating to $11, 672.12 compounded quar- terly for 8 years.
A: Quarterly interest rate is calculated using following equation Periodic interest rate = FVPV(1/n)-1…
IBM stock currently sells for 49 dollars per share. Over 12 month(s) the price will either go up by 11.5 percent or down by -7.0 percent. The risk-free rate of interest is 4.5 percent continuously compounded. If you are short one call option with strike price 51 and maturity 12 months how many shares of stock must you buy to establish a delta-neutral position?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- XYZ Corp. will pay a $2 per share dividend in 2 months. Its stock price currently is $72 per share. A call option on XYZ has an exercise price of $65 and 3-month time to expiration. The risk-free interest rate is 0.3% per month, and the stock's volatility (standard deviation) = 12% per month. Find the pseudo-American option value. (Hint: Try defining one "period" as a month, rather than as a year.) (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Pseudo-American option valueXYZ Corp. will pay a $2 per share dividend in two months. Its stock price currently is $60 per share. A call option on XYZ has an exercise price of $55 and 3-month time to expiration. The risk-free interest rate is .5% per month, and the stock’s volatility (standard deviation) = 7% per month. Find the Black-Scholes value of the option. (Hint: Try defining one “period” as a month, rather than as a year, and think about the net-of-dividend value of each share.)The current price of a non-dividend-paying stock is $25. Over the next six months it is expected to rise to $30 or fall to $21. An investor buys put options with a strike price of $27. What is the value of each option? The risk-free interest rate is 5% per annum with continuous compounding. Answer to 3dps. Group of answer choices 1.578 2.840 3.018 0.935
- A stock is traded at $39 per share. The three month risk free rate is 1.75% per annum. The company won't pay dividend in the coming three months. The volatility of the stock's return is 40% per annum. The theta for a call option with strike price 40 and three months to expiration is (xxxx) type your answer...Please answer below three requirements: Question- The current price of a non-dividend paying stock is $30. Use a two-step tree to value a put option on the stock with a strike price of $32 that expires in 6 months. Each step is 3 months, and in each step the stock price either moves up by 10% or moves down by 10%. Suppose that the risk free rate is 8% per annum with continuous compounding. 1) What should be the EUROPEAN put option price today? 2) If the option was an AMERICAN put option, what should be the price today? 3) If the volatility was given as 30%, how would the AMERICAN put option price change?A share of stock sells for $48 today. The beta of the stock is 1.3 and the expected return on the market is 16 percent. The stock is expected to pay a dividend of $.70 in one year. If the risk-free rate is 4.7 percent, what should the share price be in one year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
- IBM stock currently sells for 84 dollars per share. Over 8 months the price will either go up by 7.5 percent or down by -3.0 percent. The risk-free rate of interest is 4.5 percent continuously compounded. A call option with strike price 83 and maturity of 8 months has a delta of 0.82766. What is the value of this call option? 0.62579 O2.6708 O4.0788 2.9324 O4.3788The stock price of Heavy Metal (HM) changes only once a month: either it goes up by 26% or it falls by 19.3%. Its price now is $43. The interest rate is 0.5% per month. a. What is the value of a one-month call option with an exercise price of $43? b. What is the option delta? c. 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? d. What is the value of a two-month call option with an exercise price of $42? e. What is the option delta of the two-month call over the first one-month period? Complete this question by entering your answers in the tabs below. Req A and B Req C Req D and E d. What is the value of a two-month call option with an exercise price of $42? (Do not round intermediate calculations. Round your answer to 1 decimal place.) e. What is the option delta of the two-month call over the first one-month period? (Do not round intermediate calculations. Round your…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?
- The current price of a non-dividend paying stock is $30. Use a two-step tree to value a put option on the stock with a strike price of $32 that expires in 6 months. Each step is 3 months, and in each step the stock price either moves up by 10% or moves down by 10%. Suppose that the risk free rate is 8% per annum with continuous compounding. 1) What should be the EUROPEAN put option price today? 2) If the option was an AMERICAN put option, what should be the price today? 3) If the volatility was given as 30%, how would the AMERICAN put option price change? Volatility is 30%,Required: A share of stock is now selling for $75. It will pay a dividend of $6 per share at the end of the year. Its beta is 10. What must investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 5% and the expected rate of return on the market is 13% (Round your answer to 2 decimal places) Answer is complete but not entirely correct. $ 80.00 ⒸSuppose you think WW stock is going to appreciate substantially in value over the next six months. The stock's current price is $30 and the call option expiring in six months has an exercise price, X, of $35 and is selling at a premium (option price), C, of $12. You invest $12,000 on 1,000 options (10 contracts, each for 100 shares). What is the rate of return if the stock price six months from now is $50? Show your work.
