Question
In: Finance
Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price...
Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price R90. ExxonMobil stock currently is R90 per share, and the risk-free rate is 4%. If you believe the true volatility of the stock is 32%, Calculate the value to call option using the Black Scholes model.
Solutions
Expert Solution
Value of the call option, using Black Scholes Model= R6.17
Calculation as below:
jeff jeffy answered 2 years agoRelated Solutions
Suppose that call options on ExxonMobil stock with time to expiration 6 months and strike price...
Suppose that call options on ExxonMobil stock with time to
expiration 6 months and strike price $97 are selling at an implied
volatility of 29%. ExxonMobil stock currently is $97 per share, and
the risk-free rate is 6%. If you believe the true volatility of the
stock is 31%.
a. If you believe the true volatility of the stock is 31%, would
you want to buy or sell call options?
b. Now you need to hedge your option position against...
Suppose that call options on ExxonMobil stock with time to expiration 6 months and strike price...
Suppose that call options on ExxonMobil stock with time to
expiration 6 months and strike price $99 are selling at an implied
volatility of 31%. ExxonMobil stock currently is $99 per share, and
the risk-free rate is 3%. If you believe the true volatility of the
stock is 34%
a. If you believe the true volatility of the
stock is 34%, would you want to buy or sell call options?
b. Now you need to hedge your option position
against...
-European call and put options with 3 months of expiration exist with strike price $30 on...
-European call and put options with 3 months of expiration exist
with strike price $30 on the same underlying stock. The call is
priced at $3.5, the put is priced at $1.25, while the underlying is
currently selling for $28.5.
a) What is the net profit for the buyer of the call if the stock
price at expiration is $36?
b) What is the net profit for the seller of the call if the
stock price at expiration is $38?...
A call on a stock with stock price $25.93 has a strike price $22 and expiration...
A call on a stock with stock price $25.93 has a strike price $22
and expiration 230 days from today, available for a premium of $7.
The stock also has a put with the same strike price and expiration
as the above call, available for a put premium of $3.56. Both
options are European, there are no dividends paid on the stock, and
the interest rate for the expiration period is 8% per year. How
much could you make per...
3. Suppose that call options on a stock with strike prices $40 and $45 cost $5...
3. Suppose that call options on a stock with strike prices $40
and $45 cost $5 and $4, respectively. They both have 10-month
maturity. (a) How can those two call options be used to create a
bull spread?
(b) What is the initial investment?
(c) Construct a table showing how payoff and profit varies with
ST in 10 month, for the bull spread you created. The table should
looks like this:
Stock Price
Payoff
Profit
ST < K1
K1 <...
A call option on a stock expires in 4 months with a strike price of 75....
A call option on a stock expires in 4 months with a strike price
of 75. The price of the stock is 80, and the interest rate is 4
percent. Graph the value of this option as the standard deviation
of the underlying stock goes from 10 to 50 percent.
A stock is selling for $32.70. The strike price on a call, maturing in 6 months,...
A stock is selling for $32.70. The strike price on a call,
maturing in 6 months, is $35. The possible stock prices at the end
of 6 months are $39.50 and $28.40. If interest rates are 6.0%, what
is the option price? Show work
According the the text book the correct answer is $3.40 but how
do you get to this answer
Given the following 3 put options that have the same expiration date: A: Strike Price =...
Given the following 3 put options that have the same expiration
date:
A: Strike Price = $110, Market Price = $6
B: Strike Price = $120, Market Price = $10
C: Strike Price = $130, Market Price = $16
Explain how a butterfly spread can be created. Create a table in
excel showing the profit from this. What range of stock prices
would lead to a loss from this?
The current price of a stock is $40, and two-month European call options with a strike...
The current price of a stock is $40, and two-month European call
options with a strike price of $43 currently sell for $5. An
investor who feels that the price of the stock will increase is
trying to decide between two strategies: buying 100 shares or
buying 800 call options (8 contracts). Both strategies involve an
investment of $4,000.
a. Which strategy will earn more profits if the stock increases to
$42?
b. How high does the stock price have...
A call with a strike price of $44 costs $4. A put with the same expiration...
A call with a strike price of $44 costs $4. A put with the same
expiration date and a strike price of $40 costs $3. Calculate the
profit/loss the investor makes from a short strangle at expiration
date stock prices of (i) $38, (ii) $42, and (iii) $46. For what
range of expiration date stock prices will the investor make a
profit?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- You are tasked with assessing the health department’s intervention program in preventing recurrence of acute alcohol...
- Compare the MOSFET, JFET , and BJT and identify the reasons these devices behave differently. What...
- How would you use SAS Enterprise Miner to create a neural network model of your example?
- Explain the use of neural networking modeling in predictive analytics.
- Current Market Mix of Netflix, as detail as possible, please.
- This is all one question, thank you so much in advance! You must evaluate a proposal...
- X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup...
ADVERTISEMENT