Problem 22-12 Delta What are the deltas of a call option and a put option with the following characteristics? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) Stock price $50 = Exercise price = $50 4.4% per year, compounded Risk-free rate= continuously Maturity 9 months Standard deviation = 65% per year Answer is complete but not entirely correct. Call option delta 0.6255 Put option delta -0.3745x

Problem 22-12 Delta What are the deltas of a call option and a put option with the following characteristics? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) Stock price $50 = Exercise price = $50 4.4% per year, compounded Risk-free rate= continuously Maturity 9 months Standard deviation = 65% per year Answer is complete but not entirely correct. Call option delta 0.6255 Put option delta -0.3745x

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter18: Derivatives And Risk Management

Section18.A: Valuation Of Put Options

Problem 1P

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Aa.2 A stock price is currently $42. The risk-‐free interest rate is APR 4% with continuous compounding. What is the value of a six-‐month American put option with a strike price of $46 using two-‐step binomial option pricing model? Stock pricemove up by 5% or down by 7% for each three month. Less than $3.0. Larger than $3.0 but less than $3.7. Larger than $3.7 but less than $4.3. Larger than $4.3 but less than $5.0.
QUESTION 36 The stock of company X currently trades at £58.00. The risk-free interest rate is 5% per annum. Consider a forward written on the stock with a maturity of 6 months. The company will pay a dividend of £5.00 shortly before the maturity of the forward. The no-arbitrage forward price is closest to: A. £54.40 B. £55.90 C. £58.00 D. £59.40 QUESTION 37 Which of the following statements is most accurate? A. It is never optimal to exercise an American call option on an index early B. It is never optimal to exercise an American put option on gold early C. It is never optimal to exercise an American put option on a currency early D. None of the above
13. 3. Build a three-step CRR stock price tree using the following information:•maturity: 3 months, i.e. each step is one month•annual volatility of the stock: 0.35•annual, continuously compounded risk-free rate: 1%•stock price today: 50 (b) Calculate the price of an American put option with strike K = 50.
3:30 PM O0 .Stock price is SO=$50.S0=$50. Only one(discrete) dividend $5$5 is going to be paid in 9months. Continuously compounded risk-freeinterest rate is 12%.Var(FPO,1S)=0.01Var(FO,1P(S)=0.01 in 1 year.(Hint: Variance of Prepaid forward price is usefulfor calculating volatility).By using BS model, theone-year 45-strike European put optionpremium is
14. A stock currently trading at $121 pays a $8 dividend in four months and $5 dividend seven months. A call option on the stock with an intrinsic value of $9 expires in ten months. Annualized yield for T-bill for this option is 6% and annualized variance of the continuously compounded return on the stock is 0.0225. (a) Compute S0′ (b) Compute d1 and N(d1) (c) Compute N(d2) assuming d2 is -.1153. Use this N(d2) in part (d). (d) Compute the price of the European call.
Question 16 A call option with an exercise price of $40 and four months to expiration sells for $6.78. If the risk-free rate is 1.80% per year (compounded continuously) and the market price of a stock is $45, calculate the price of a put option on this stock $5.24 $5.00 $1.54 $2.50
J 9 You are working on the options trading desk of FINM Investment Bank. Three-month European call and puts on stock BUSN with strike $60 are selling for $5 and $3, respectively. BUSN is currently trading at $60 and does not pay dividends. The interest rate is 3% p.a.c.c. Are you able to make an immediate and riskless profit without any out-of-pocket expenses? If so, show all steps and calculations for the entire duration of your strategy.
Problem 14-03 What should be the prices of the following preferred stocks if comparable securities yield 8 percent? Use Appendix B and Appendix D to answer the questions. Round your answers to the nearest cent. MN, Inc., $10 preferred ($120 par) $ CH, Inc., $10 preferred ($120 par) with mandatory retirement after 13 years $ What should be the prices of the following preferred stocks if comparable securities yield 10 percent? Round your answers to the nearest cent. MN, Inc., $10 preferred ($120 par) $ CH, Inc., $10 preferred ($120 par) with mandatory retirement after 13 years $ In which case did the price of the stock change? As with the valuation of bonds, an increase in interest rates causes the value of preferred stock to . In which case was the price more volatile? While the prices of both preferred stocks , the price of the was more volatile.
Problem 8-09 Stock A has a risk premium of 6.2 percent. If Treasury bills yield 2.2 percent and the expected return on the market is 9.2 percent, what is the stock’s beta coefficient? Round your answer to two decimal places.
12)Under dollar-cost averaging (cedi cost averaging), an investor will purchase GHS6,000 worth of stock each year for three years. The stock price is GHS40 in year 1, GHS30 in year 2, and GHS48 in year 3. i)Compute the average price per share. ii) Compute the average cost per share. Explain why the average cost is less than the average price
23.10 What are the prices of a call option and a put option with the following characteristics? Stock price = $46  Exercise price = $50  Risk-free rate = 6% per year, compounded continuously Maturity = 3 months Standard deviation = 54% per year
H2. Suppose that a stock price is currently 70 dollars, and it is known that at the end of each of the next two six-month periods, the price will be either 17 percent higher or 17 percent lower than at the beginning of the period. Find the value of an American put option on the stock that expires a year from now, and has a strike price of 76 dollars. Assume that no arbitrage opportunities exist, and a risk-free interest rate of 11 percent. Answer = dollars. Please show proper step by step calculation