Determine share price needed on expiry to obtain profit

Assignment Help Financial Management

Reference no: EM13941968

Actuarial FM question:

Please show steps, final answer is

a)call payoff = 0 when S_T=80 or 90, =10 when S_T=105

call profit= -2.04 when S_T=80 or 90, =7.96 when S_T=105

?b) S_T> 107.0396

At time 0, the share price of a stock was $85. At that time, a call option on a share of stock with a strike price of $95 expiring 6 months later had a premium $2.00. Risk free interest is 4% annual effective. (a) Determine the payoff and the profit on the purchased call option on the expiry date for each of the following stock values at time T = 0.5: 80, 90, 105. (b) Determine the share price needed on expiry to obtain a profit on the purchased call option of at least $10.

Reference no: EM13941968

Questions Cloud

Trying to remove a very tight bolt : Mechanics sometimes put a length of pipe over the handle of a wrench when trying to remove a very tight bolt. How does this help? (It is also hazardous since it can break the bolt.)

Discuss the potential influences of power : Write a summary in which you critically discuss the potential influences of power and politics that can affect your scenario organisation. Explain the issues of power and politics that may arise within and across teams as a consequence of the pend..

Analyzing the leadership of a 21st century : Using relevant theories and models critically evaluate and analyse the leadership of a 21st century business leader (must be an Australian or American leader).

Find the maximum loss and the break-even point : Assume you sell a European call option on AUD100,000 (AUD = Australian Dollar). The strike price is X(USD/AUD)=0.72 (USD = U.S. Dollar), the maturity is one year, and the premium is 5 cents per AUD. Find the maximum loss and the break-even point S(US..

Determine share price needed on expiry to obtain profit : At time 0, the share price of a stock was $85. At that time, a call option on a share of stock with a strike price of $95 expiring 6 months later had a premium $2.00. Risk free interest is 4% annual effective. Determine the payoff and the profit on t..

Java program for input of numbers only : Edit Java program for input of numbers only. If the user inputs a letter the program must abort with a messegae like "Program aborted by user". Please explain the code.

Expected to provide after-tax operating cash flows : What is the IRR for the following project if its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?

What appears on the screen when you place mouse pointer text : What appears on the screen when you place the mouse pointer under text that was corrected by AutoCorrect? Which button do you click to show formatting marks in a document? The first time you save a document, which dialog box appears? What happens whe..

Calculate the rate at which radiation is incident : Calculate the rate at which radiation is incident on A3 due to emission and reflection from A1.

User Account

All Pages