American put option

Assignment Help Finance Basics
Reference no: EM131492789

A put option on a stock with three months to maturity has the exercise price of $60. The stock is currently traded at $59 per share and a volatility of 30% per annum. The continuously compounded risk free rate is 3% per annum.

a. Using one month steps, what would be the price of the option if it is a European put option?

b. What is the price of the option if it is an American put option which could be exercised early? When is it likely to be exercised?

Reference no: EM131492789

Questions Cloud

Benefit in terms of increased fees : You wonder whether this would be a win-win investment for your retired client, who is seeking higher current income, and for you
Determine three key drivers for evaluation : Determine three key drivers for evaluation when considering whether to invest in the futures market, indicating your likelihood to do so.
Describe the theories of jung and gardner : Describe the theories of Jung and Gardner. Using the theories of Jung and Gardner, identify your top three strengths
Describe the current structure : Summarise the current state of the mission of the organisation and classify the strategy currently pursued by the organisation and Describe the current structure
American put option : What is the price of the option if it is an American put option which could be exercised early? When is it likely to be exercised?
Calculate the excess of revenues over expenses for the year : calculate the excess of revenues over expenses for the year.
Describe common errors made in the administration : Describe common errors made in the administration, scoring, and interpretation of psychological tests
What will be change in bond price in dollars-percentage term : It has had a credit rating of BB and a yield to maturity of 8.7 percent. What will be the change in the bond’s price in dollars and percentage terms?
Difference between common stock and preferred stock : a. What is the difference between common stock and preferred stock? What are some of the characteristics of each type of stock?

Reviews

Write a Review

Finance Basics Questions & Answers

  What are the economic order quantity and cycle length

The demand for an item is constant at 100 units a year. Unit cost is £50, the cost of processing an order is £20 and holding cost is £10 a unit a year. What are the economic order quantity, cycle length and costs?

  Problem regarding the shares of stock outstanding

There are 100,000 shares of stock outstanding which trade at their book value of $30. Compute BWP's contribution, contribution margin, EAT, DOL, and EPS.

  List the federal government major revenue sources

Listing Use a graphic organizer like the one below to list the federal government's major revenue sources.

  Calculate value of accounts receivable

Suppose your firm has Day Sales Outstanding of Receivables equal to 31 days. Sales are $11mm. Calculate value of Accounts Receivable?

  How should mary account for the collection

She also had an $8,000 long-term capital gain last year. Her taxable income for last year was an NOL of $15,000. During the current year, she unexpectedly collected $12,000 on the debt. How should Mary account for the collection?

  What is capitals after-tax wacc

If the returns required by investors are 9 percent, 13 percent, and 15 percent for the debt, preferred stock, and common stock, respectively, what is Capital's after-tax WACC? Assume that the firm's marginal tax rate is 40 percent.

  What is the opportunity cost of capital for an average-risk

whispering pines inc. is all-equity-financed. the expected rate of return on the companys shares is 12 percent.a. what

  Value of woorhoos stock now

The Woorhoos Lock Company is planning a two-for-one stock split. You own 5,000 shares of Woorhoos common stock that is currently selling for $120 a share. What is the value of your Woorhoos stock now, and what will it be after the split?

  Coffeecarts has a cost of equity of 15 has an effective

coffeecarts has a cost of equity of 15 has an effective cost of debt of 4 and is financed 70 with equity and 30 with

  Computation of repricing maturity gap

The following is the balance sheet of Boston Bank. The average maturity of demand deposits is estimated at 2 years.

  What is the irr for this project

You will save $280,000 before taxes per year in order processing costs and you will be able to reduce working capital by $95,000 (this is a one-time reduction). If the tax rate is 35 percent, what is the IRR for this project?

  What are linear relationship and a curvilinear relationship

When are correlational research designs used in behavioral research? What are their advantages and disadvantages?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd