Question

In: Finance

Question 2: You are to calculate the price a European call option considered “at the money”...

Question 2: You are to calculate the price a European call option considered “at the money” on a stock index with a current level of 300, a risk free rate of interest of 9% per annum, volatility of 16% per annum, 6 months until expiration, and has an annual dividend yield of 2.5%.

Solutions

Expert Solution


Related Solutions

A. What is Price of a European Put option? B. Price of a European Call option?...
A. What is Price of a European Put option? B. Price of a European Call option? Spot price = $60 Strike Price = $44 Time to expiration = 6 months Risk Free rate = 3% Variance = 22% (use for volatility) Show steps/formula
Calculate the call option value at the end of one period for a European call option...
Calculate the call option value at the end of one period for a European call option with the following terms: The current price of the underlying asset = $80. The strike price = $75 The one period, risk-free rate = 10% The price of the asset can go up or down 10% at the end of one period. What is the fundamental or intrinsic value? What is the time premium?
If we write a European call option on €, the strike price is $1.2141/€. The option...
If we write a European call option on €, the strike price is $1.2141/€. The option premium is $0.0500/€. On the expiration date, the market spot price is $1.3262/€. Then__ A. The option is exercised, and we lose $0.0621/€. B. The option is not exercised, and we profit $0.0500/€ C. The option is exercised, and we lose $1.2762/€. D. The option is not exercised, and we profit $0.1121/€
A European call option and put option on a stock both have a strike price of...
A European call option and put option on a stock both have a strike price of $21 and an expiration date in 4 months. The call sells for $2 and the put sells for $1.5. The risk-free rate is 10% per annum for all maturities, and the current stock price is $20. The next dividend is expected in 6 months with the value of $1 per share. (a) describe the meaning of “put-call parity”. [2 marks] (b) Check whether the...
A European call option and put option on a stock both have a strike price of...
A European call option and put option on a stock both have a strike price of $21 and an expiration date in 4 months. The call sells for $2 and the put sells for $1.5. The risk-free rate is 10% per annum for all maturities, and the current stock price is $20. The next dividend is expected in 6 months with the value of $1 per share. (a) In your own words, describe the meaning of “put-call parity”. (b) Check...
A European call option and put option on a stock both have a strike price of...
A European call option and put option on a stock both have a strike price of $25 and an expiration date in four months. Both sell for $4. The risk-free interest rate is 6% per annum, the current stock price is $23, and a $1 dividend is expected in one month. Identify the arbitrage opportunity open to a trader.
You are offered a European Call option. This means you will have the option, but not...
You are offered a European Call option. This means you will have the option, but not the obligation, to buy the stock at the strike price K of $100. The price of the stock today is $90. Your time discount rate is Beta=0.98, the risk-less rate of interest is 3%. The price of the stock follows the following process over two periods: with probability 75% the price will not change from period 0 to period 1, but with probability 25%...
what is the value of a european call option with an exercise price of $40 and...
what is the value of a european call option with an exercise price of $40 and a maturity date six months from now if the stock price is $28 the instantaneous variance of the stock price is 0.5 and the risk free rate is 6% use both a) two step binomial tree b) black scholes pricing formula
i. Calculate The Option value for a two period Binomial European Call option with the following...
i. Calculate The Option value for a two period Binomial European Call option with the following terms and the time values. Current Price of underlying asset K100 Strike price of underlying asset K80 One period risk free rate of return 10% Stock price can either go up or down by 15% ii. compare the results if the stock price can go up or down by 30%
The price of a European call option on anon-dividend-paying stock with a strike price of...
The price of a European call option on a non-dividend-paying stock with a strike price of 50 $ is 6 $. The stock price is 51 $, the continuously compounded risk-free rate for all maturities is 6% and the time to maturity is one year. What is the price of a one-year European put option on the stock with a strike price of 50 $?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT