Question

In: Finance

As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option...

As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option and European put futures options. A futures price is currently $50. It is expected to move either to $55 or down to $45 over the next three month. The risk-free interest rate is 8% per annum with continuous compounding.

Solutions

Expert Solution

ANSWER IN THE IMAGE ((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

1. CALL OPTION.

2. PUT OPTION.


Related Solutions

As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option...
As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option and European put futures options. A futures price is currently $50. It is expected to move either to $55 or down to $45 over the next three month. The risk-free interest rate is 8% per annum with continuous compounding. a.  What is the probability of an up movement in a risk-neutral world?  (sample answer: 35.0%) b.  What is the value of a three-month call option with a...
As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option...
As an analyst at Bank of America Merrill Lynch, you are evaluating European call futures option and European put futures options. A futures price is currently $50. It is expected to move either to $55 or down to $45 over the next three months. The risk-free interest rate is 8% per annum with continuous compounding. a.  What is the probability of an up movement in a risk-neutral world? (sample answer: 35.0%) b.  What is the value of a three-month call option with...
You are working at Bank of America Merrill Lynch as a Portfolio Manager. You are thinking...
You are working at Bank of America Merrill Lynch as a Portfolio Manager. You are thinking about rebalancing clients portfolio position and researching on various industries, i.e., housing construction, health care, energy, technology, financials, coal mining, and steel production. Choose one or two industry that you would expect to perform best in future. Write a brief summary and explain why you client would be convinced by your decision.
identify the Failed mergers between Bank of America acquired Merrill Lynch? why these Alliances are Successful...
identify the Failed mergers between Bank of America acquired Merrill Lynch? why these Alliances are Successful Ford / Eddie Bauer?
As a financial analyst at JPMorgan Chase investments, you are evaluating European call options and put...
As a financial analyst at JPMorgan Chase investments, you are evaluating European call options and put options using Black Scholes model. Suppose BMI’s stock price is currently $75. The stock’s standard deviation is 7.0% per month. The option with exercise price of $75 matures in three months. The risk-free interest rate is 0.8% per month. Please answer the following questions. Please choose all correct answers. 1. The price of the European call option is $13.14 2. The price of the...
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%...
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
You buy a European call option for a stock. The premium paud for this put option...
You buy a European call option for a stock. The premium paud for this put option is $15. The pricd is $200. You are now at the maturity of this option. (a) If the price at maturity is $210, what is the optimal decision? Calculate and explain possible choices. (b) What are the profits/losses for the seller of this option? Explain. (c) What is the breakeven point? Explain.
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?
In your portfolio you have purchased 1 European Call option and written 1 European Put option...
In your portfolio you have purchased 1 European Call option and written 1 European Put option on stock ABC for $4 and $2 respectively. The strike/exercise prices of both the options are equal to $50. These options are set to expire on the 3rd Friday of June 2015. The possible values for the price of the stock ABC on the 3rd Friday of June 2015 are: $30 with 20% chance; $50 with 30% chance and $70 with 50% chance. The...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT