How much does the option holder gain

Assignment Help Finance Basics
Reference no: EM133001474

A stock index is currently 990, the risk-free rate is 5%, and the dividend yield on the index is 2%. Use a three-step tree to value an 18-month American put option with a strike price of 1,000 when the volatility is 20% per annum. How much does the option holder gain by being able to exercise early? When is the gain made?

Reference no: EM133001474

Questions Cloud

How many acres are in a square mile : News about the recent wildfires generally talk about number of acres burned by the fires. Most people don't think in terms of acres. If an acre is defined to be
Calculate the after-tax salvage cash flow : Adams, Incorporated would like to add a new line of business to its existing retail business. The new line of business will be the manufacturing and distributio
Slowdown of global economies : COVID -19 Pandemic has impacted International Business in a big way - by way of a slowdown of global economies, Demand and Supply shocks. Discuss.
How financial cooperative starts to operate : Please help me answer this question: How financial cooperative starts to operate?
How much does the option holder gain : How much does the option holder gain by being able to exercise early? When is the gain made?
What will be the dollar cost of six months : If the exchange rate changes immediately to AU$1.70/$, what will be the dollar cost of 6 months of imports to Brownies
Amount of total manufacturing cost for the period : How do you calculate this question? According to the text, it appears the calculation I am using is yielding the wrong result.
Compute the expected return on your two-asset portfolio : If a normal state of the economy occurs, Stock C offers a 10% return while stock T offers a 20% return. Compute the expected return on your two-asset portfolio
How much should marie monthly payments : Marie will spend 25-years working toward this goal investing monthly at an annual rate of 7.2%. How much should Marie's monthly payments

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the payback period

After the three years, the value is expected to be zero. What is the payback period?

  What is value of company-enoch-arden corporation

Enoch-Arden Corporation has earnings before interest and taxes of $5 million and a 30 percent tax rate. It is able to borrow

  How much of this return came from the dividend and how much

yesterday september 22 2012 wireless logic corp. wlc paid its annual dividend of 1.25 per share. because wlcs financial

  What was the most recent dividend paid

If the required rate of return for this company is 14 percent, what was the most recent dividend paid by the company?

  Evaluate npv of investment under the best-case assumptions

Evaluate the NPV of the investment under the best-case assumptions.  Explain how sensitivity and scenario analysis are useful for evaluating project risk? How can break-even analysis be helpful in evaluating project risk?

  What information can the pro-forma earnings number

What information can the pro-forma earnings number provide that the GAAP earnings number does not,  Give examples from Facebook of the possible differences that might exist between the two earnings numbers.

  Identify any arbitrage opportunities

Explain how you would create a synthetic stock position and identify the cost. Suppose you observe a $100 stock price, identify any arbitrage opportunities.

  What is the effective cost of borrowing in this case

Your firm has an average collection period of 23 days. Current practice is to factor all receivables immediately at a 1.30 percent discount. What is the effective cost of borrowing in this case?

  Price of oil futures will trigger a margin call company

What price of oil futures will trigger a margin call if the company has $150,000 cash in the account initially? (recall CL contract has a multiplier of 1000)

  Increase and decrease in profits amount

Why even though interest rates increase and decrease by same percentage it will still result in the increase and decrease in profits amount to be difference?

  How much would each monthly payment be

Fatima wants to buy a boat that is available at two dealerships. The price of the boat is the same at both dealerships. Middlefield Motors would let her make.

  Assess the relative efficiency

In a short paragraph (100 words), explain to your statistics professor why Treep was using the wrong probability to assess the relative efficiency.

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