Estimate the new price of the call option

Assignment Help Financial Management
Reference no: EM131495731

Suppose you are considering selling a one year call options with a strike price of $80 for a stock that is currently trading at $75. The risk free interest rate is 4%. The cost per option is $8.152, Δ = 0.527, Γ = .018, and θ = -.016.

If the price of the stock were to move to $74.

A) Use the Δ approximation to estimate the new price of the call option.

B) Use the Δ- Γ approximation to estimate the new price of the call option.

Reference no: EM131495731

Questions Cloud

Calculating perpetuity values : The Perpetual Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $12,000 per year forever.
What is net cost of position : Suppose you are considering selling a one year call options with a strike price of $80 for stock that is currently trading at $75. What is net cost of position
Determine the correct debt level for the company : Calamata Corporation wants to determine what kind of debt it should issue, and how much. The treasurer has built a model to simulate the pro-forma for the firm.
What lease payment will make lessee and lessor : An asset costs $420,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value.
Estimate the new price of the call option : you are considering selling one year call options with strike price of $80 for stock that is currently trading at $75. estimate the new price of the call option
Calculating annuities : You are planning to save for retirement over in next 30 years. you withdraw each month from your account assuming 25-vear withdrawal period
Is clapper inventory policy optimal : Clapper Manufacturing uses 2,000 switch assemblies per week and then reorders another 2,000. If the relevant carrying cost per switch assembly is $40.
Calculating number of periods : One of your customers is delinquent on his accounts payable balance. how long will it take for the account to be paid off?
Make a floating-rate interest rate payment : Suppose that today is Monday, February 20th and you have loan of $10,000,000 outstanding, on which you will have to make floating-rate interest rate payment

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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