Question
In: Finance
Suppose we have a call option on a stock with the following details: strike price $50,...
Suppose we have a call option on a stock with the following details: strike price $50, current stock price $50, call option premium $5. If we buy the call option, calculate the resulting holding period return for the following future stock prices on the expiry date of the option:
Future stock price at option expiry Return on call option
$45
$50
$55
$60
$70
$80
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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(Delta-Hedge / No Rebalancing) Suppose
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A European call option and put option on a stock both have a
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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
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(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...
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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
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current stock price is $23, and a $1 dividend is expected in one
month. Identify the arbitrage opportunity open to a
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Suppose that a 6-month European call A option on a stock with a strike price of...
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is $73 with a volatility of 15%. Risk-free interest rates (all
maturities) are 10% per annum with continuous compounding.
(a) Construct a butterfly spread with the two kinds of options....
Suppose that a 6-month European call A option on a stock with a strike price of...
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a strike price of $75 costs $5 and is held until maturity, and
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$80 costs $3 and is held until maturity. The underlying stock price
is $73 with a volatility of 15%. Risk-free interest rates (all
maturities) are 10% per annum with continuous compounding.
(a) Construct a butterfly spread with the two kinds of
options....
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