Reference no: EM13921381
You are given the following information. S=50, X=59, simple annual risk free interest rate is 5%, standard deviation of monthly stock returns is 10%. (Caution: must covert to annualized continuous compounding values)
1. What is the value of a one year European call option using the black scholes option pricing model?
Show values of N(d1) and n(d2) using Excel and using the formula provided in the lecture note.
2. Solving the value of the above one year American call using CBOE Options Toolbox
3. Nothing the Greek values: How will the call value change for
a. 1% change in interest rate
b. $1 increases in the stock price
c. Reduction of one day in maturity
4. All options are European and the stock does not pay a dividend. Which option is relatively more expensive? Explain. (Hint: Compute implied volatility).
a. S= $50, C(X=$60) =$14
b. S=$50, C(X=$65) = $10
|
Estimate the expected return on the stock
: Use the information below to estimate the expected return on the stock of Bieber Corporation. Please show work.
|
|
Does your husband help with the child rearing
: On page 174 of your textbook, read the story of the flight attendants whose conditional job offer was rescinded for failure to disclose HIV-positive status on the medical questionnaire. What do you think the court should decide and why? Look up th..
|
|
Discuss the advantages and disadvantages of such a proposal
: Several Fortune 100 companies have nominated members of the clergy to be members of their boards of directors. Discuss the advantages and disadvantages of such a proposal.
|
|
What proceeds will they receive on sale of the property
: A house is selling for $150,000. A deposit of $20,000 was made when the sales contract was signed. The down payment is 30% and the balance will be financed with a 25-year mortgage at 4.25% and 4 discount points. If the sellers are responsible for the..
|
|
Call option using the black scholes option pricing model
: You are given the following information. S=50, X=59, simple annual risk free interest rate is 5%, standard deviation of monthly stock returns is 10%. What is the value of a one year European call option using the black scholes option pricing model? A..
|
|
Why you would expect musician to have seats on the cso board
: In most organizations, it is unusual for labor to have representation on the board of directors and management committees. Why you would expect musicians to have seats on the CSO board and management committees.
|
|
Which of the following is true about the office of president
: Which of the following is true about the office of the president? Which of the following is true of the president and his or her veto power
|
|
Calculate the subscription ratio
: The market capitalization of NYC company is $10,000,000, the current share price is $40. NYC plans to raise new equity in an SEO, it plans to issue 100,000 new shares. Calculate the subscription ratio.
|
|
Using the rate of return on the stock as the cost of equity
: XYZ Inc has a capital structure that consists of 40% debt and 60% common stock. Dividends are growing at a constant rate of 5% and the current dividend is $2.00. The stock is currently selling for $21.88. The before tax cost of debt is 14% and the fi..
|