Calculate the price of one-year call option

Assignment Help Financial Management
Reference no: EM131978925

The current price of Kulalat Corporation is $35.0. Its stock price will either go up by 40% or go down by 40% in one year. The stock pays no dividends. The one-year risk-free interest rate is 5%. Using the binomial model, calculate the price of a one-year call option on Kulalat stock with a strike price of $45. (Show your calculations; use a binomial tree/timeline with two branches to summarize the information). No excel, please.

Reference no: EM131978925

Questions Cloud

Find the npv for both conveyor belt systems : Hagar Industrial Systems Company (HISC) is trying to decide between two different conveyor belt systems. System A costs $290,000, has a four-year life.
What is the value of this long forward contract : If the risk-free rate is 12% per annum with continuous compounding, what is the value of this long forward contract?
The short-term or the long-term maturity : Is the spread larger for the short-term or the long-term maturity?
What would be ssc estimated cost of equity : Situational Software Co. (SSC) is trying to establish its optimal capital structure. Its current capital structure consists of 25% debt and 75% equity.
Calculate the price of one-year call option : Calculate the price of a one-year call option on Kulalat stock with a strike price of $45.
Analysis of statistics and engineering factors : ENG1004 Engineering Problem Solving Principles Report Assessment - Analysis of Statistics and Engineering Factors of Relevant to Chosen Field
Estimate total financing requirements : Estimate H & M corp. total financing requirements (i.e., total assets) for 2001 and its net funding requirements (DFN). Give a brief summary of forecasting.
Put some money in an account : Your grandfather put some money in an account for you on the day you were born.
Accounting issues about a particular organisation : which raises management accounting issues about a particular organisation. The article must be written recently (after 1 July 2017) and taken from

Reviews

Write a Review

Financial Management Questions & Answers

  What is the maximum dividend you could pay this year

What is the maximum dividend you could pay? (in cash and in? stock) this year and still comply with your? covenants?

  Market portfolio under various economic conditions

Financial analysts have estimated the returns on shares of Drucker Corporation and the overall market portfolio under various economic conditions as follows. The analyst considers each state to be equally likely. Using these data, compute the beta of..

  Aftertax salvage value of the asset

If the tax rate is 32 percent, what is the aftertax salvage value of the asset?

  What is the bonds current yield

Peachtree Machinery has a bond issue outstanding with 15 years to maturity, a coupon rate of 8.5% (paid semiannually), and a par value of $1,000.

  Cash flow from leasing relative to purchasing in year three

Artisan’s is considering leasing a new computer. What is the cash flow from leasing relative to purchasing in Year 3?

  Create storyboard of at least four frames for coffee drink

Create a storyboard of at least 4 frames for a new coffee drink that will be targeted to college students.

  What is the annual interest rate

Company expects to use $1,600,000 short term credit bus wants a $3,000,00 line of credit in case of unexpected events. LIBOR is 4% and the loan is priced at LIBOR plus 2.5% with Commitment fee of 0.3% on the unused portion of the line. Bank also requ..

  What are the benefits of ratio analysis

What are the benefits of ratio analysis? What are the limitations of ratio analysis? What can be done to minimize the limitations on ratio analysis? Explain.

  Difference between commercial banks and investment banks

Explain the difference between commercial banks and investment banks. Discuss their roles in our financial system, how each facilitates capital raising by firms, and how each earns profits. Discuss the potential conflict of interest when these two en..

  Calculate the payments and loan balances for years

A basic 30-year ARM is made for $300,000 with an initial interest rate of 2%. Payments are monthly. The rate will reset every year. The index is the one-year Treasury and there is a 2% margin. There are no relevant caps. Calculate the payments and lo..

  What is the future value if payments are ordinary annuity

Suppose you plan to invest the payments for 6 years, what is the future value if the payments are an ordinary annuity?

  What should be the price of portage bay? stock

what should be the price of Portage Bay? stock?

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