Find the price of the put option

Assignment Help Financial Management
Reference no: EM131601559

An at the money 3-month call option on the SPX index is currently trading at $52.82 on CBOE. An investor wishes to price a 3-month put option on the SPX. Suppose the SPX is currently at 1400, and the put is also at the money (i.e. currently the price of the index is exactly the same as the exercise price of the option written on this index.) Take the volatility of the return on SPX to be 15% and the risk-free rate to be 6%. Find the price of the this put option.

Reference no: EM131601559

Questions Cloud

Why an entrepreneur would consider a grant for financing : Summarize why an entrepreneur would consider a grant for financing and the key factors for obtaining a grant.
How does debt financing work and what are the pros? : How does debt financing work and what are the pros? Explain Community Development Banks and Community Development Credit Unions.
New securities to finance expansion in overseas markets : Countdown Corporation issued $15,000,000 of new securities to finance expansion in overseas markets.
Uses the above mentioned put and call options : Propose a strategy to take advantage of your beliefs that uses the above mentioned put and call options.
Find the price of the put option : An at the money 3-month call option on the SPX index is currently trading at $52.82 on CBOE. Find the price of the this put option.
Firm develop stronger competitive advantage : What is a value proposition and how can it help a firm develop a stronger competitive advantage?
Annual budget is in disarray because of unexpected variances : Willow’s annual budget is in disarray because of unexpected variances, some of which are not in her control.
How much will you have four years from today : You want to quit your job and go back to school for a law degree 4 years from now, how much will you have 4 years from today?
Using the dividend-discount model as your technique : what price will you tell Mr. Moneypockets that HMK stock should be selling for today, using the dividend-discount model as your technique?

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate internal rate of return using time value of money

Assume you are the CFO of a company of your choice. Provide an example of a long-term capital asset that the business would need to operate and/or grow its business. Williams and Park Accounting Practice is considering investing in a new computer sys..

  What will be optimal upper cash limit

the trading cost per sale or purchase of marketable securities to be $340 per transaction. What will be its optimal upper cash limit?

  What is the dollar amount of taxes paid

Corvette Diner had sales of $1,000,000 in 2015 and their cost of goods sold represented 70 percent of sales. Selling and administrative expenses were 10 percent of sales. Depreciation expense was $100,000 and interest expense for the year was $10,000..

  How much would it be willing to lend business owner

A small business owner visits her bank to ask for a loan. If bank is charging customers 8.50 percent APR, how much would it be willing to lend business owner

  Cost straight-line to zero over the projects life

Romo Enterprises needs someone to supply it with 121,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $880,000 to install the equipment nec..

  Calculate the effective borrowing cost

Given the following information, calculate the Effective Borrowing Cost (EBC). Loan amount: $175,000, Term: 30 years, Interest rate: 7 %, Payment: $1,164.28, Discount points: 1, Origination fee: $3,250. Assume the loan is held until the end of year 1..

  What is the percentage change in the bond price

A 9-year bond has a yield of 13.5% and a duration of 8.63 years. If the BOND'S yield changes by 60 basis points, what is the percentage change in the bond’s price? Is this an increase or decrease?

  What is the value of company

Your company has an expected unlevered, after-tax cash flow for the next two years of $281,000. What is the value of the company?

  Define investment bankers expect to exercise the option

The investment bankers expect to exercise the option and purchase the 300,000 shares in exactly one year, when the stock price is fore-casted to be $4.50 per share. However, there is a chance that the stock price will actually be $10.00 per share ..

  What profit margin must the firm achieve

What profit margin must the firm achieve?

  What is the aftertax cost of debt and pretax cost

What is the pretax cost of debt? What is the aftertax cost of debt?

  What is the rate of return on investment

Calculating the Rate of Return of Investment Using Financial Leverage. Suppose Shaan invested just $10,000 of his own money and had a $90,000 mortgage with an interest rate of 8.5 percent. If after three years he sold the property for $120,000. What ..

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