European options trading on the stock

Assignment Help Finance Basics
Reference no: EM133057012

The stock is trading today at $120 a share and the 1-year, $100 face value, zero coupon bond trades today at $96.

There are 1-year European options trading on the stock, as follows: C(120) = $16.5, P(120) = ?, C(130) = $12.3, P(130) = ?

Assume that you can go long or short these assets without frictions and that you can trade fractions of the shares and the zero-coupon bond. The stock does not pay dividends.

1. If a call with a strike price of $140 is traded. What does that convexity imply about its lowest price?

Reference no: EM133057012

Questions Cloud

Describe the corporate strategy of a company : Describe the corporate strategy of a company that has a positive operating cash flow, an investing cash flow that is negative, and a financing cash flow
Explain the term capitalization : Explain the term capitalization and the steps a company follows to create value for their shareholders
Calculate the economic value added : Net income to shareholders was $8,672 million. (Assume a tax rate of 21%.) Calculate the economic value added assuming its cost of capital is 10%
Forecasts for earnings per share : Nathan ios your friend who is valuing a company using consensus analyst forecasts. he has obtained forecasts for earnings per share (EPS) and dividends per shar
European options trading on the stock : The stock is trading today at $120 a share and the 1-year, $100 face value, zero coupon bond trades today at $96.
Calculate balance in Warrior of Darkness dividend account : Calculate the balance in Warrior of Darkness Ltd.'s capital dividend account as of December 31, 2021, showing the maximum capital dividend (if any)
Why vcpe professionals use preferred shares : A. Why VCPE professionals use preferred shares to structure their deals?
What is the minimum price per unit : Required - What is the minimum price per unit the CFO needs to bid to make exactly zero profit on the special order of A115
Option on currency hkd against the usd : Q1. Consider the option on currency HKD against the USD:

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the annual opportunity cost of a checking account

What is the annual opportunity cost of a checking account that requites $300 minimum balance to avoid service charges? Assume an interest rate of 3 percent

  What are the potential benefits and costs for a company

What are the potential benefits and costs for a company (that is located in a developing country with a bad performing currency) that decides to list its shares

  What is the holding rate of return for given investment

What is the holding rate of return for a 20 year investment that earns 5% per year, each year? What would a $200 investment grow into?

  Find the rate of simple interest earned by the fund

If the fund balance at the end of 16 years is $2069.92, find the rate of simple interest earned by the fund.

  Patients with sickle cell anemia

Why do providers asked patients with sickle cell anemia with swollen hands and feet these questions

  Inherited an ordinary annuity

Today you inherited an ordinary annuity of $25000 paid at the end of the year for 15 years. You estimated a yield of 10% for this annuity.

  What is the expected stock price that prevails

What is the expected stock price that prevails after the rights offering? What is the value of a right?

  How sensitive is the npv to changes

HI5002 Finance for Business What is the NPV of the project and how sensitive is the NPV to changes in the price of the new smart phone - You used Harvey Norman as a pure play company to estimate the cost of capital for HCL. Are there any potential p..

  Why the earnings per share of barnes enterprises changed

If all the shares of Noble Corporation are exchanged for those of Barnes Enterprises on a share-for-share basis, what will postmerger earnings per share be for Barnes Enterprises?

  Predict the method for performing price analysis

Predict the method for performing price analysis that the US Govt will want from VectorCal.

  Calculate the present value of the depreciation tax shield

Calculate the present value of the depreciation tax shield for an asset in the 3-year class life costing $100,000. Three-year class percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively for years 1 through 4.

  Relationship between price of bond and interest rates

Discuss the relationship between the price of a bond and interest rates.

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