Determine the minimum price of the call option

Assignment Help Finance Basics
Reference no: EM131453813

Question: A European call option is written on a stock whose current price S = 80. The exercise price X = 80, the interest rate r = 8%, and the time to option exercise T = 1. The stock is assumed to pay a dividend of 3 at time t = ½. Use Proposition 7 to determine the minimum price of the call option.

Reference no: EM131453813

Questions Cloud

Coupon rate bond that returns the par value : What is the price today (in dollars and cents) of a 3-year 10.95% coupon rate bond that returns the par value of $1000 at maturity. Use a required rate of retur
Define the term arbitrage : An American call option is written on a stock whose price today is S = 50. The exercise price of the call is X = 45.
Has he reached the upper limit of debt obligations : What is Robert’s debt-to-equity ratio? Has he reached the upper limit of debt obligations? Yes or No?
How company would implement each of components of technology : Describe how a company would implement each of these components of technology. Explain the purpose and how it would be utilized within the company.
Determine the minimum price of the call option : A European call option is written on a stock whose current price S = 80. The exercise price X = 80, the interest rate r = 8%, and the time to option exercise.
What is the present value of the new drug : What is the present value of the new drug if the interest rate is nbsp 9% per? year?
Why would an organization want to reduce its capacity : How is process selection related to product design and capacity determination?What is the system capacity, and which is the bottleneck department?
Calculate the market risk premium : In order to evaluate investments, calculate the Market Risk Premium (MRP).
Explain at least three technological components : Describe at least three technological components that are required for data-driven decision making. How each component is relevant to business analytics.

Reviews

Write a Review

Finance Basics Questions & Answers

  A firm has common stock of 84 paid-in surplus of 200 total

a firm has common stock of 84 paid-in surplus of 200 total liabilities of 380 current assets of 330 and fixed assets of

  Find the amount of goodwill

Jack corporation paid $800,000 for all of Ann company issued and outstanding common stock. Ann's recorded assets and liabilities on April 1, 20X2, were as follows:

  What is the effective annual rate

Allis Bank is offering you a credit card with an APR of 14.7 percent. The bank compounds interest monthly. What is the effective annual rate?

  Payment on time each month

The kindly Bank Seven representative has told Maya that she only needs to pay $40 per month until the account is paid off. If Maya makes her $40 payment on time each month, and makes no other charges, how many months will it take Maya to pay off ..

  Explain the difference between nopat and net income

Explain the difference between NOPAT and net income. Which is a better measure of the performance of a company's operations?

  The dividend is expected to grow 7 percent ayear for the

warr corporation just paid a dividend of 1.50 a sharethat isdo 1.50. the dividend is expected to grow 7 percent a

  Find the net working capital for the years ending 2010

Construct a balance sheet for 2010 and 2011 b. List all the working capital accounts c. Find the net working capital for the years ending 2010 and 2011

  What are the measures of exposure traditionally

Short questions on risk management and measures of exposure - What are the three measures of exposure traditionally studied, and what are the advantages and disadvantages of using each one?

  What does an income statement measure or track over time

What does an income statement measure or track over time?

  What rate of return is built into the annuity

You just won the state lottery. The state gives you the choice of $1,000,000 today or a 20-year annuity of $75,000, with the first payment coming one year from today. What rate of return is built into the annuity?

  What is the maturity of the bond

ABC Inc.has a bond outstanding which pays 8% coupon compounding semi-annually. The current market price of the bond is $1,196 and the yield to maturity of the bond is 6%. What is the maturity of the bond.

  An inheritance offers the amount of 100 in one year but

what amount comes closest to the future value at the end of year 20 of a 15 year annuity of 550 that makes its first

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd