Question
In: Finance
The current price of a non-dividend-paying stock is $50. Over the next six months it is...
The current price of a non-dividend-paying stock is $50. Over the next six months it is expected to rise to $60 or fall to $48. Assume the risk-free rate is zero. An investor sells call options with a strike price of $55. What is the value of each call option according to the one-step binomial model? Please enter your answer as a number rounded to two decimal places (with no dollar sign).
Solutions
jeff jeffy answered 1 year agoRelated Solutions
The current price of a non-dividend-paying stock is $30. Over the next six months it is...
The current price of a non-dividend-paying stock is $30. Over
the next six months it is expected to rise to $36 or fall to $28.
Assume the risk-free rate is 10% per annum (continuously
compounded). What, to the nearest cent, is the price of an American
put option with a strike price of $33? (Your answer should be in
the unit of dollar, but without the dollar sign. For example, if
your answer is $1.02, just enter 1.02.)
The current price of a non-dividend-paying stock is $30. Over the next six months it is...
The current price of a non-dividend-paying stock is $30. Over
the next six months it is expected to rise to $36 or fall to $28.
Assume the risk-free rate is 10% per annum. What, to the nearest
cent, is the price of a European put option with a strike price of
$33? (Your answer should be in the unit of dollar, but without the
dollar sign. For example, if your answer is $1.02, just enter
1.02.)
The current price of a non-dividend-paying stock is $30. Over the next three months it is...
The current price of a non-dividend-paying stock is $30. Over
the next three months it is expected to rise to $36 or fall to $26.
Assume that the risk-free rate is 10% per annum (continuously
compounded). What is the risk-neutral probability of the stock
price moving up to $36?
a) .40
b) .48
c) .50
d) .60
A price on a non-dividend paying stock is currently £50. Over each of the next two...
A price on a non-dividend paying stock is currently £50. Over
each of the next two six-month periods the stock is expected to go
up by 5% or down by 10%. The risk- free interest rate is 3% per
annum with continuous compounding.
(a) What is the value of a one-year European call option with a
strike price of £48?
(b) What is the value of a one-year American call option with a
strike price of £48?
(c) Discuss how...
The current price of a non-dividend-paying stock is $80. Over the next year it is expected...
The current price of a non-dividend-paying stock is $80. Over
the next year it is expected to rise to $86 or fall to $76. An
investor buys put options with a strike price of $82. Which of the
following is necessary to hedge the position?
Select one:
a. Buy 0.6 shares for each option purchased
b. Sell 0.6 shares for each option purchased
c. Buy 0.8 shares for each option purchased
d. Sell 0.8 shares for each option purchased
The current price of a non-dividend-paying stock is $80. Over the next year it is expected...
The current price of a non-dividend-paying stock is $80. Over
the next year it is expected to rise to $92 or fall to $79. Assume
the risk free rate is 5%. An investor buys a put option with a
strike price of $84. What is the value of the option today? How
would the investor hedge the put option position? Assume that the
option is written on 100 shares of stock.
The current price of a non-dividend-paying stock is $50. The risk-free interest rate is 1%. Over...
The current price of a non-dividend-paying stock is $50. The
risk-free interest rate is 1%. Over the next year, it is expected
to rise to $52 or fall to $47. An investor buys a European put
option with a strike price of $53. What is the value of the
option?
Group of answer choices:
A: $0.93
B: $1.93
C: $1.95
D: $2.47
The price of a non-dividend paying stock is now $40. Over each of the next two...
The price of a non-dividend paying stock is now $40. Over each
of the next two three-month periods, it is expected to go up by 10%
or down by 10%. The risk-free interest rate is 4% per annum with
continuous compounding.
a. Calculate the risk-neutral probability p of an up-move over
each three-month period
b. Calculate the value of a six-month European call option with
a strike price of $42
c. Calculate the value of a six-month European put option...
The current price of a non-dividend paying stock is $50. Use a two-step tree to value...
The current price of a non-dividend paying stock is $50. Use a
two-step tree to value a European put option on the stock with a
strike price of $48 that expires in 6 months. Each step is 3
months, the risk-free rate is 4%, and u = 1.1 and d = 0.9. Please
enter your answer rounded to two decimal places (and no dollar
sign).
The current price of a non-dividend paying stock is $50. Use a two-step binomial tree to...
The current price of a non-dividend paying stock is $50. Use a
two-step binomial tree to value a European call option on the stock
with a strike price of $52 that expires in 6 months, so each step
is 3 months, the risk free rate is 4% per annum with continuous
compounding. What is the option price when u = 1.1 and d = 0.9
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