Demonstrate analytically that this is not coincidence

Assignment Help Financial Management

Reference no: EM131977657

For a stock index, S = $100. sigma = 30%, r = 5%, Div = 3%, and T= 3. Let n = 3. Do not use the black scholes model but a binomial model. a. What is the price of a European call option with a strike of $95? b. What is the price of a European put option with a strike of $95? c. Now let S = $95, K = $100, sigma = 30%, r= 3%, and Div = 5%. (You have exchanged values for the stock price and strike price and for the interest rate and dividend yield.) Value both options again. What do you notice? Demonstrate analytically that this is not a coincidence?

Reference no: EM131977657

Questions Cloud

Review problem and find the cost of equity : If instead you know that the aftertax cost of debt is 7 percent, what is the cost of equity? (Do not round intermediate calculations).

How much will you have if you wait ten years : (Future value of an ordinary annuity) You are graduating from college at the end of this semester and after reading the The Business of Life box in this chapter

Calculate the value of your retirement plan : Future Value of Multiple Annuities Assume that you contribute $280 per month to a retirement plan for 20 years. Then you are able to increase the contribution.

Placing eleven books into her backpack : Regardless of the? arrangement, how many ways are there of placing eleven books into her backpack?

Demonstrate analytically that this is not coincidence : What do you notice? Demonstrate analytically that this is not a coincidence?

Calculate the present value of the annuity : Calculate the present value of the annuity. (Round your answer to the nearest cent.) $1400 monthly at 6.3% for 30 years.

Decremental budgeting and zero-based budgeting : Discuss the advantages/disadvantages of incremental/decremental budgeting and zero-based budgeting.

What is the company total assets turnover : Gardial & Son has an ROA of 12%, a 5% profit margin, and a return on equity equal to 16%. What is the company's total assets turnover?

Intervention is function of monetary policy-fiscal policy : The intervention is a function of monetary policy (MP), fiscal policy (FP) or the Bank of Canada acting as a fiscal agent (FA)

User Account

All Pages