Question
In: Finance
1. Price a European Call & Put and an American Put on a stock that is...
1. Price a European Call & Put and an American Put on a stock that is currently selling at $25 and has a volatility of 25%. The options all have a life of 7 months and a strike price of $26. The 7-month risk free rate is 3% per annum with continuous compounding. a. Use a 12-step binomial tree to price all 3 options b. Use a 13-step binomial tree to price all 3 options c. Use the Black-Scholes-Merton formula to price the European options
2. Use the information in question 1, but now the stock will pay a dividend of $1 in 3 months from today. Price European Call & Put and American Call & Put using a 7-step binomial tree.
Looking for answer and explanation in Excel please
Solutions
jeff jeffy answered 3 months agoRelated Solutions
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.
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
The price of a stock is $40. The price of a 1-year European put on the...
The price of a stock is $40. The price of a 1-year European put
on the stock with a strike price of $30 is quoted as $7 and the
price of a 1-year European call option on the stock with a strike
price of $50 is quoted as $5.
(a) Suppose that an investor buys the stock, shorts the call
option, and buys the put option. Calculate the profit function and
draw a diagram illustrating how the investor's profit or...
A European call option and a European put option on a stock both have a strike...
A European call option and a European put option on a stock both
have a strike price of $45 and expire in 6 months. Currently, the
stock price is $48.11 and the put price is $4.11. The risk-free
rate is 2% per annum continuous compounding. Calculate the CALL
price.
Q1. The price of a stock is $40. The price of a 1-year European put option...
Q1. The price of a stock is $40. The price of a 1-year European
put option on the stock with a strike of $30 is quoted as $7 and
the price of a 1-year European call option on the stock with a
strike of $50 is quoted as $5. Suppose that an investor buys 100
shares, shorts 100 call options, and buys 100 put options. Draw a
diagram illustrating how the investor’s P&L varies with the
stock price over the...
1.The price of a three-month European put option on a stock with a strike price of...
1.The price of a three-month European put option on a stock with
a strike price of $60 is $5. There is a $1.0067 dividend expected
in one month. The current stock price is $58 and the continuously
compounded risk-free rate (all maturities) is 8%. What is the price
of a three-month European call option on the same stock with a
strike price of $60?
Select one:
a. $5.19
b. $1.81
c. $2.79
d. $3.19
2.For the above question, if the...
A European call option on Visa stock costs $85.36, while a European put option on the...
A European call option on Visa stock costs $85.36, while a
European put option on the same stock costs $31. Both options
expire in 0.5 years and have a strike price of 800. Google does not
pay dividends and its stock price is $850.
What should be the risk-ree rate (effective annual rate)?
what is the price of a European put if the price of the underlying common stock...
what is the price of a European put if the price of
the underlying common stock is $20, the exercise price is $20, the
risk free rate is 8%, the variance of the price of the underlying
stock is 0.36 and the option expires six months from now? use
both
a) a two steps binomial tree
b) the black scholes pricing formula
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