Risk-free rate per year that excludes arbitrage opportunity

Assignment Help Financial Management
Reference no: EM131513292

The prices of European call and put options on a non-dividend-paying stock with 1 year to maturity and a strike price of $120 are $20 and $5, respectively. The current stock price is $130. What is the implied continuously compounded risk-free rate per year that excludes arbitrage opportunity?

Reference no: EM131513292

Questions Cloud

Find the prices of the bond : Find the prices of the bond. Construct the amortization table of the bond.
Construct the amortization table of the bond : Consider a $1,000 par value 5-year bond with a coupon rate of 7% paid semiannually and $1,200 redemption value. Construct the amortization table of the bond.
Find the price of an american put option on the stock : Consider a non-dividend-paying stock whose current price S(0) = S is $40. Find the price of an American put option on the stock
What should be the price of the european put option : what should be the price of the European put option with the same maturity and strike price?
Risk-free rate per year that excludes arbitrage opportunity : What is the implied continuously compounded risk-free rate per year that excludes arbitrage opportunity?
Bringing boards more deeply into governance-risk assessment : What potential might there be for bringing Boards more deeply into governance and risk assessment issues than in the past,
What is the length of the firm cash conversion cycle : What is the length of the firm’s cash conversion cycle?
Put option at expiration as function of the stock price : Graph the value of the put option at expiration as a function of the stock price S = S(T).
What is difference in future value between the two options : You loan your friend $25,000 so she can buy her first home. what is the difference in future value (FV) between the two options?

Reviews

Write a Review

Financial Management Questions & Answers

  What is your net profit on position

You expect that the stock of GoPro, currently trading at $71 per share, will be volatile in the next three months, and the price will change significantly. However, you do not know the direction of the change. Thus, you decide to enter into a long st..

  Offered an investment plan

You have $18,750 you want to invest for the next 30 years. You are offered an investment plan that will pay you 9 percent per year for the next 15 years and 13 percent per year for the last 15 years. How much will you have at the end of the 30 years?..

  Considering updating its current manual accounting system

Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline.

  Walton medical laboratory

Walton tentatively discussed the project with several senior physicians to see what would be required.

  Bond that has a relationship with the stock market

There is a bond that has a relationship with the stock market, and it goes up(falls) 4%, if the S&P rises (falls) 10%. We know that the T bond rate is 3%, and the S&P has returned 11 % over the last 100 years. Compute the YTM of this bond.

  What are the reasons for contradiction between net present

What are the reasons for contradiction between Net Present Value (NPV) and Internal Rate of Return (IRR). What is social cost benefit analysis?

  Forward discount relative to the pound

Suppose it is January 1, 1998 and spot pounds are selling at $1.7342, while 90 day forward pounds are selling at $1.7156. At the same time, DM spot and 90 day forward rates are $0.6138 and $0.6014, respectively. According to these quotes the

  Projects is Most likely to be financed with venture capital

Which one of the following projects is most likely to be financed with venture capital?

  Explain how the fed lowers and raises the federal funds rate

Explain how the Fed lowers and raises the federal funds rate. What would happen to the standard of living if financial institutions did not exist? Why?

  Announces is quarterly dividend will increase

Dew Drop In, Inc. announces is quarterly dividend will increase from $3.80 to $4.00. After the announcement, the price of Dew Drop In, Inc.'s stock drops.

  What is lower bound on the option value

Consider a European call option with a strike price of $50.0 and maturity of 10.0 months. What is the lower bound on the option value?

  What are free cash flows generated by project each other

Company A is trying to determine whether to replace an existing asset. The proposed asset has a purchase price of $50,000 and has installation costs of $3,000. The asset will be depreciated over its five year life using the simplified straight-line m..

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