Consider a european call option on a stock

Reference no: EM13275261

Consider a European call option on a stock, with 1 year to expiration, and a strike price of 50. Suppose that the risk-free rate is 4% APR with semiannual compounding, and that the call premium (or price) is $1. a) What price must the stock be in 1 year so that the profit to the long call is the same as the profit to the short call? b) Does anything change if the stock pays dividends?

Reference no: EM13275261

Questions Cloud

Should the investment be made : A company is planning to invest $ 550000 in machinery having an estimated life of 5 years. The machinery is expected to save $ 125000 each year. What will be the NPV if the discount rate is 10%? Should the investment be made?

How is the voltage divided among resistors in parallel : How is the voltage divided among resistors in parallel and What happens to resistance when resistors are connected in parallel

Find the price of a call option on the stock : The current price of a stock is $20 . In 1 year, the price will be either $26 or $16. The annual risk -free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year. (Hint: Use daily compou..

State a net ionic equation for the reaction that occurs : Write a net ionic equation for the reaction that occurs when cobalt(II) carbonate (s) and excess hydrochloric acid (aq) are combined.

Consider a european call option on a stock : Consider a European call option on a stock, with 1 year to expiration, and a strike price of 50. Suppose that the risk-free rate is 4% APR with semiannual compounding, and that the call premium (or price) is $1.

What is next year dividend payment : Briley, Inc., is expected to pay equal dividends at the end of each of the next two years. Thereafter, the dividend will grow at a constant annual rate of 5 percent, forever. The current stock price is $38.

Design op-amp astable multivibrator to have output frequency : Design an op-amp astable multivibrator to have an output frequency of 400Hz and the frequency should be adjustable by plus or minus 20%. Use a 741 op-amp with supply of plus or minus 18 volts.

What is the horizontal range of the balls travel : You then kick the ball with the same initial velocity and at the same angle to the horizontal. This time, however, you kick it up a 15 degree slope. What is the horizontal range of the ball's travel

State an net ionic equation for the reaction : Write a net ionic equation for the reaction that occurs when zinc sulfide (s) and excess hydriodic acid (aq) are combined.

User Account

All Pages