Deteimine the price of the synthetic stock

Assignment Help Financial Management

Reference no: EM131087854

Given that exercise price is $75, call option premium is $3.5, put option premium is $ 1, both options have a time to maturity of 32 days, and the riskfree rate is 5o/o p.a., please show how you could create a "synthetic stock" that could serve as the underlying asset of the two European options. Deteimine the price of the synthetic stock

Reference no: EM131087854

Questions Cloud

Financing the project with new equity will reduce earnings : During recent years your company has made considerable use of debt financing, to the extant that it is generally agreed that the percent debt in the firm’s capital structure is too high. It is too expensive for the firm to issue new debt. Financing t..

Calculate the annualized percent return of an investment : Calculate the annualized percent return of an investment using the following information:

Weighted average of that implied by two outstanding debt : Erna Corp. has 7 million shares of common stock outstanding. The current share price is $79, and the book value per share is $6. Erna Corp. also has two bond issues outstanding. Assume that the overall cost of debt is the weighted average of that imp..

The standard deviation of return : Assuming that the rates of return associated with a given asset investment are normally distributed; that the expected return, r, is 19.7%; and that the coefficient variation, CV, is 1.32, answer the following questions: The standard deviation of ret..

Deteimine the price of the synthetic stock : Given that exercise price is $75, call option premium is $3.5, put option premium is $ 1, both options have a time to maturity of 32 days, and the riskfree rate is 5o/o p.a., please show how you could create a "synthetic stock" that could serve as th..

About the market outlook and want to hedge : You are concerned about the market outlook and want to hedge your exposure in the stock market. Two strategies are available. One is to write call options on your portfolio. The other is to use portfolio insurance and pay for the cost by writing call..

Make the smartest decisions when it comes to money : Richard doesn't always make the smartest decisions when it comes to money. He has more taxes withheld from his paycheck so he will get a large check in April from the IRS. Well, this check came in the mail yesterday. $1200.00 and he deposited it into..

Moderately bullish about the stock market : You are moderately bullish about the stock market. Design an appropriate option strategy that will combine two put options of different exercise prices. Explain the expected payoff.

Use straight-line depreciation to zero over project life : You are evaluating two different silicon wafer milling machines. The Techron I costs $267,000, has a three-year life, and has pretax operating costs of $72,000 per year. The Techron II costs $465,000, has a five-year life, and has pretax operating co..

User Account

All Pages