Question
In: Finance
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
Solutions
jeff jeffy answered 1 year agoRelated Solutions
6) A stock is selling for $18.50. The strike price on a call, maturing in 6...
6) A stock is selling for $18.50. The strike price on a call,
maturing in 6 months, is $20. The possible stock prices at the end
of 6 months are $22.50 and $15.00. Interest rates are 6.0%. How
much money would you borrow to create an arbitrage on a call
trading for $2.00?
A) $2.54
B) $4.85
C) $6.60
D) $8.85
Answer: B need details of solution
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...
a) A call option with a strike price of $68 on a stock selling at $82...
a) A call option with a strike price of $68 on a stock selling
at $82 costs $15.3. What are the call option’s intrinsic and time
values?
b) A put option on a stock with a current price of $37 has an
exercise price of $39. The price of the corresponding call option
is $2.85. According to put-call parity, if the effective annual
risk-free rate of interest is 4% and there are three months until
expiration, what should be the...
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.
Suppose that a 6-month European call A option on a stock with a strike price of...
Suppose that a 6-month European call A option on a stock with a
strike price of $75 costs $5 and is held until maturity, and
6-month European call B option on a stock with a strike price of
$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....
Suppose that a 6-month European call A option on a stock with a strike price of...
Suppose that a 6-month European call A option on a stock with
a strike price of $75 costs $5 and is held until maturity, and
6-month European call B option on a stock with a strike price of
$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....
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.
For an index, the $930 strike 6 months call premium is $45.34 and the $950 strike...
For an index, the $930 strike 6 months call premium is $45.34
and the $950 strike 6 months call is selling for $28.78. What is
the maximum profit that an investor can obtain from a strategy
employing a bull spread at strike prices 930 and 950 with these two
call options over 6 months? Interest rates is 0.5% per month.
$2.44 B. $2.94 C. $37.06 D. $36.56
The price of a European call that expires in six months and has a strike price...
The price of a European call that
expires in six months and has a strike price of $28 is $1. The
underlying stock price is $27, and a dividend of $0.50 is expected
in two months and again in five months. The continuously compounded
interest rate is 10%. What is the price of a European put option
that expires in six months and has a strike price of $28? Explain
the arbitrage opportunities in the earlier problem if the European...
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