Reference no: EM13515862
1.Short-term interest rates are 5%. An at-the-money six-month $95 call sells for $7. What is the parity value for a six-month at-the-money put, assuming the underlying stock pays no dividends?
2. One-year interest rates are 5%. A stock currently sells for $40 and will either rise to $50 or fall to $35 in six months. Using the binomial option pricing model, determine the fair value of a $45 call.
3. Your company owns coastal land worth $1 million. Pending the outcome of a regulatory decision, in six months the land will either increase in value by exactly 60% or remain unchanged in value. A real estate speculator offers your firm $50,000 for the right to buy the land anytime within the next six months for $1.3 million. The interest rate is 8% per year.
Evaluate this offer and recommend whether or not your company should accept it.
4. A $50, one-year call sells for $4; a $50 one-year put sells for $6.45. If the one-year interest rate is 8%, calculate the implied stock price.
5. Suppose one-year interest rates are 6%. A stock currently sells for $100 and at the end of one year will sell for either $110 or $95.
a. Using binomial pricing, calculate the value of a $105 call.
b. Using your answer to part a and the theory of put call parity, calculate the value of a $105 put.
6. Indicate whether the option premium will rise or fall:
|
Increase in interest rates
|
Call à
|
_____
|
Put à
|
_____
|
|
Decrease in time until expiration
|
Call à
|
_____
|
Put à
|
_____
|
|
Decrease in stock volatility
|
Call à
|
_____
|
Put à
|
_____
|
|
Unexpected increase in cash dividends
|
Call à
|
_____
|
Put à
|
_____
|
|
What are some non-mendelian inheritance patterns
: What are some non-Mendelian inheritance patterns? I need to know this for my biological anthropology test.
|
|
Explain modern human variation
: What was the typological model used to explain modern human variation, and why did its use fall out of favor?? Can someone let me know what they think?
|
|
About the earliest australopithecines
: What do we know about the earliest australopithecines? Can someone please sum up the most important information about them for me so I can learn it for a test?
|
|
Estimate the value of the option in problem
: A non-dividend paying stock sells for $23 3/8. What is the theoretical value of a European style, $25 call with 50 days until expiration, assuming interest rates of 6% and annual volatility of 25%?
|
|
Evaluate this offer and recommend whether or not
: One-year interest rates are 5%. A stock currently sells for $40 and will either rise to $50 or fall to $35 in six months. Using the binomial option pricing model, determine the fair value of a $45 call.
|
|
Why the price of a put option and the price of a call option
: XYZ Corporation sells for $35 per share; the AUG option series has exactly six months until expiration. At the moment, the AUG 35 call sells for $3, and the AUG 35 put sells for $1 3/8. Using this information, what annual interest rate is implied i..
|
|
Calculate the number of contracts that should be bought
: Suppose that when the contracts are closed out, the portfolio has fallen in value by $350,000 and the value of the S&P 500 index is 250.00. Calculate the combined gain or loss (indicate which) on the hedged portfolio.
|
|
Stock index futures
: Suppose that when the contracts are closed out, the portfolio has fallen in value to $4.2 million and that the S&P 500 index has fallen to 215.00. Calculate the gain or loss on the combined positions (stock portfolio and futures contracts).
|
|
Find the average kinetic energy of each type of molecule
: A cylinder contains a mixture of helium and argon gas in equilibrium at a temperature of 208 C. What is the average kinetic energy of each type of molecule
|