Question
In: Finance
A stock priced at 50 can go up or down by 10 percent over two periods....
A stock priced at 50 can go up or down by 10 percent over two periods. The risk-free rate is 4 percent. Which of the following is the correct price of an American put with an exercise price of 50? (10 points)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
A stock is currently selling for $50. The stock price could go up by 10 percent...
A stock is currently selling for $50. The stock price could go
up by 10 percent or fall by 5 percent each month. The monthly
risk-free interest rate is 1 percent. Calculate the price of an
American put option on the stock with an exercise price of $55 and
a maturity of two months. (Use the two-stage binomial method.)
A. $5.10
B. $3.96
C. $4.78
D. $1.19
Why is it A
Consider a stock currently trading at 25 that can go up or down by 15 percent...
Consider a stock currently trading at 25 that can go up or down
by 15 percent per period. The risk-free rate is 10 percent. Use
one-period binomial model. a. Determine the two possible stock
prices for the next period. b. Determine the intrinsic values at
expiration of a European call with an exercise price of 25. c. Find
the value of the option today. d. Construct a hedge by combining a
position in stock with a position in the call....
Consider a stock currently trading at 25 that can go up or down by 15 percent...
Consider a stock currently trading at 25 that can go up or down
by 15 percent per period. The risk-free rate is 10 percent.
Use one-period binomial model.
A. Determine the two possible stock prices for the next
period.
B. Determine the intrinsic values at expiration of a European
call with an exercise price of 25.
C. Find the value of the option today.
D. Construct a hedge by combining a position in stock with a
position in the call....
A stock price is $100 now. In one month it can go 10% up or down....
A stock price is $100 now. In one month it can go 10% up or
down. In the second month it can go 10% up or down. The annual
interest rate is 10% with continuous compounding. Use risk-‐free
portfolios to determine the value of: (do not use probabilities) a)
A two-‐month European call with strike price 100 b) A two-‐month
European call with strike price 104
A stock is currently priced at $100. Over each of the next two three month periods...
A stock is currently priced at $100. Over each of the next two
three month periods it is expected to increase by 10% or fall by
10%. Consider a six month call option with a strike of $95. The
risk free rate is 8% per annum.
What is the risk neutral probability p?
MC Options: A. 0.601 B. 0.399 C. 0.65 D. 0.55
What is the call price?
MC Options: A. 10.87 B. 11.55 C. 9.00 D. 8.60
A stock is currently at $50. Over each of the next two 6-month periods, the stock...
A stock is currently at $50. Over each of the next two 6-month
periods, the stock may move up to a factor 1.2 or down by a factor
of 0.8 in each period. A European put option with strike price of
$48 and maturity of one year is available. The current risk-free
rate is 4.0% per year.
a. Is the put option in the money or out the money? Explain
b. What is the current value of this European put...
A stock is currently at $50. Over each of the next two 6-month periods, the stock...
A stock is currently at $50. Over each of the next two 6-month
periods, the stock may move up to a factor 1.2 or down by a factor
of 0.8 in each period. A European put option with strike price of
$48 and maturity of one year is available. The current risk-free
rate is 4.0% per year .
a. Is the put option in the money or out the money? Explain
b. What is the current value of this European...
A stock price is currently priced at £110. Over each of the next two three-month periods...
A stock price is currently priced at £110. Over each of the next
two three-month periods it is expected to down by 7% or go up by
8%. The risk-free interest rate is 5% per annum with continuous
compounding. What is the value of a six-month European call option
with a strike price of £105?
If possible, please provide a detailed step by step as I would
like to fully comprehend it rather than just copying it. Thank you
:)
A stock price is currently priced at £100. Over each of the next two three-month periods...
A stock price is currently priced at £100. Over each of the next
two three-month periods it is expected to down by 7% or go up by
8%. The risk-free interest rate is 5% per annum with continuous
compounding. What is the value of a six-month European call option
with a strike price of £95?
If possible, please provide a detailed step by step as I would
like to fully comprehend it rather than just copying it. Thank you
:)
A stock price is currently $50. Over each of the next two 3-month periods it is...
A stock price is currently $50. Over each of the next two
3-month periods it is expected to go up by 6% or down by 5%. The
risk-free interest rate is 5% per annum with continuous
compounding.
(a) What is the value of a 6-month European put option with a
strike price of $51? (b) What is the value of a 6-month American
put option with a strike price of $51?
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