Calculate the price of the call

Assignment Help Finance Basics
Reference no: EM131960675

Question: Consider a European call on a stock when there are ex-dividend dates in four months and seven months. The dividend on each ex-dividend date is expected to be $2.50. The current stock price is $50, the exercise price is $51, the volatility is 20% per annum, the continuously compounded riskfree interest rate is 12% per annum, and the time to expiration is nine months. Calculate the price of the call. Please and thank you!

Reference no: EM131960675

Questions Cloud

What do you expect to spend to buy the underlier : What do you expect to spend to buy the underlier (assume $0 if not exercised) and what is the present value? What do you expect to receive from selling.
Managers are aligned with corporate goals : Which of the following is a compensation scheme that is often used to try to ensure that managers are aligned with corporate goals?
Compute the realized return on the bond : Consider a bond that pays an 8% coupon semiannually over the next 10 years. You intend to hold the bond over the next 2 years and then sell it.
The beginning of the trading day : At the beginning of the trading day, John places a limit sell order for 500 shares of DEF stock at $75/share while DEF is trading at $72/share.
Calculate the price of the call : Consider a European call on a stock when there are ex-dividend dates in four months and seven months. The dividend on each ex-dividend date is expected.
What is the volatility of the portfolio : What is the volatility of the portfolio as the number of stocks becomes arbitrarily large? What is the average correlation of each stock within.
Discuss the need for hospital and physician professional : Discuss the need for hospital and physician professional liability coverage (malpractice insurance) in American health care today.
Complete the health history of an adolescent worksheet : Obstetrics history and well young adult behavioral health history. Complete the Health History and Screening of an Adolescent or Young Adult Client worksheet.
Describe the nature of accelerated earnings : Describe the nature of accelerated earnings. What agency problems could result from these? What key elements of oversight could contain them?

Reviews

Write a Review

Finance Basics Questions & Answers

  Learn more about government issued t-bills and munis

Learn more about government issued T-bills and munis. Would you invest in government issued T-bills? Why or why not? Are there specific munis you would or would not invest in?

  What is the net income for this firm

Building an income statement. Draiman, Inc., has sales of $795,000, costs of $345,000, depreciation expense of $76,000, interest expense of $41,000, and a tax rate of 35 percent. What is the net income for this firm?

  Prepare a 700-1050 word paper on capital budgeting in which

prepare a 700-1050 word paper on capital budgeting in which you respond to the following in the capital budgeting

  Example of a fixed and a variable cost

If you are an operations manager at a prison, give an example of a fixed and a variable cost. Justify your answer (hint: how do you calculate AFC?)

  What is the expected value of stock five years

What is the stocks expected dividend yield for the coming year - What is the growth rate and What is the expected value of this stock five years from now?

  What other forms of market risk might remain

If a portfolio of derivatives is delta hedged by adding a position in Eurodollar futures, what other forms of market risk might remain? How can these risks be eliminated?

  Describe the unique aspects of revenue recognition

Real estate companies contend that conventional accounting does not recognize the underlying value of the property and that this misleads investors. Discuss.

  Find the purchased bond

An IBM bond pays 7 percent interest, and a Florida State bond pays 5%. If you are in a 40% tax bracket, which should you purchase?

  Advantages and disadvantage of risk in investment

The concept of risk is based on uncertainty about future outcomes. Write down the advantages and disadvantage of risk in investment.

  If the annually compounded interest rate is 12 use the rule

here are two useful rules of thumb. the rule of 72 says that with discrete compounding the time it takes for an

  Prepare a cash budget for august 2011 for pdc and describe

A. Prepare PDC’s sales schedule, purchases schedule, and wages schedule for August 2011. B. Prepare a cash budget for August 2011 for PDC and describe how the forecast affects the end-of-month cash balance.

  Stock and the remaining in t-bills

What is the expected return to an investor who decides to invest 70% of his portfolio in the stock and the remaining in T-bills?

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