User Account

All Pages

European option and an american option

Assignment Help Finance Basics
Reference no: EM133113680

a. You are an options dealer who deals in non-publicly traded options. One of your clients wants to purchase a one-year European call option on Deutsche Bank shares with an exercise price of $30. Another dealer is willing to write a one-year European put option on Deutsche Bank shares with an exercise price of $30, and sell you the put option for a price of $3.50 per share. If Deutsche Bank pays no dividends and is currently trading for $25 per share, and if the risk-free interest rate is 7.5%, what is the lowest price you can charge for the call option and guarantee yourself a profit?

b. What are the key inputs that determine an option's price? Please explain each input and its key function.

c. What is the difference between a European option and an American option?

Reference no: EM133113680

Questions Cloud

Price of a bond with the risk-free cash flows : Assume that transaction costs are zero and there is no credit risk in any transaction. Suppose that: (1) the price at time 0 of a 2-year annual-pay coupon bond
Fixed-rate mortgage with no-point : 4) For this fixed-rate mortgage with no-point (mortgage A), what is the effective yield?
Study of organizational behavior : The concepts of power, trust, influence, and politics are critical to the study of organizational behavior.
Debt financing and equity financing : Explain the three trade-offs that guide the choice between debt financing and equity financing.
European option and an american option : b. What are the key inputs that determine an option's price? Please explain each input and its key function.
Explain the primary objectives of kwetu ltd : Q.1. Kwetu Ltd is a business enterprise located in Kampala city. It is engaged in a highly competitive business of producing and marketing of bottled-mineral wa
Calculate the expected rate of return on stock : You recently purchased a stock that is expected to increase by 19 percent in a booming economy, increase by 12 percent in a normal economy, and decrease by 18 p
What are the effective annual interest rates : What are the effective annual interest rates of each if you were to decline the discount, and which deems to be the most desirable option?
Value of the interest tax shield : Your firm is considering issuing? one-year debt, and has come up with the following estimates of the value of the interest tax shield and the probability of dis

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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