Question

In: Finance

28. A stock with a current price of $18 will either move up by a factor...

28. A stock with a current price of $18 will either move up by a factor of 1.2 or down by a factor of .9 each period over the next two periods. The risk-free rate of interest is 4.5 percent. What is the current value of a call option with a strike price of $20?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

the stock price is currently $80. The stock price annual up-move factor is 1.15. The risk...
the stock price is currently $80. The stock price annual up-move factor is 1.15. The risk free rate is 3.9%. Compute the value of a 2 year European call option with an exercise price of $62 using a two-step binomial model
The stock price is currently $50. The stock price annual up-move factor is 1.15. The risk-free...
The stock price is currently $50. The stock price annual up-move factor is 1.15. The risk-free rate is 3.9%. What is the value of a 1-year European call option with an exercise price of $52. $ 3.21 $ 2.38 $ 2.73 $ 1.95
The current price of Kilot Corporation is $30.00. Its stock price will either go up by...
The current price of Kilot Corporation is $30.00. Its stock price will either go up by 30% or down by 30% in one year. The stock has no dividends. The one year risk free rate is 4%. Using the binomial model, calculate the price of a one years put option on Kilot Stock with a strike price of $32. (show your calculations; use a binomial tree/timeline with two branches to summarize the information)
Consider a binomial world in which the current stock price of 80 can either go up...
Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. Assume a one-period world. Answer questions 12 through 15 about a call with an exercise price of 80.What is the hedge ratio if the stock goes down one period? 2 period
The current price of a stock is $50. In 1 year, the price will be either...
The current price of a stock is $50. In 1 year, the price will be either $65 or $35. The annual risk-free rate is 10%. Find the price of a call option on the stock that has an exercise price of $55 and that expires in 1 year. (Hint: Use daily compounding.)
The current price of a stock is $50. In 1 year, the price will be either...
The current price of a stock is $50. In 1 year, the price will be either $65 or $35. The annual risk-free rate is 10%. Find the price of a call option on the stock that has an exercise price of $55 and that expires in 1 year. (Hint: Use daily compounding.)
The current price of a stock is $48. In 1 year, the price will be either...
The current price of a stock is $48. In 1 year, the price will be either $55 or $31. The annual risk-free rate is 6.6%. Find the price of a call option on the stock that has a strike price of $50 and that expires in 1 year. ( Use daily compounding.)                                               Inputs                       P0   = ?    u   = ? X = ?    d   =...
Roslin Robotics stock has a volatility of 28 % and a current stock price of $...
Roslin Robotics stock has a volatility of 28 % and a current stock price of $ 64 per share. Roslin pays no dividends. The​ risk-free interest is 5 %. Determine the​ Black-Scholes value of a​ one-year, at-the-money call option on Roslin stock.
The current price of stock XYZ is 100. In one year, the stock price will either...
The current price of stock XYZ is 100. In one year, the stock price will either be 120 or 80. The annually compounded risk-free interest rate is 10%. i. Calculate the no-arbitrage price of an at-the-money European put option on XYZ expiring in one year. ii. Suppose that an equivalent call option on XYZ is also trading in the market at a price of 10. Determine if there is a mis-pricing. If there is a mis-pricing, demonstrate how you would...
1.The current price of a stock is $21. In 1 year, the price will be either...
1.The current price of a stock is $21. In 1 year, the price will be either $27 or $15. The annual risk-free rate is 6%. Find the price of a call option on the stock that has a strike price is of $23 and that expires in 1 year. (Hint: Use daily compounding.) Round your answer to the nearest cent. Assume 365-day year. Do not round your intermediate calculations. 2.The current price of a stock is $15. In 6 months,...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT