Standard deviation of returns

Assignment Help Financial Management

Reference no: EM132018574

1) A share of JMP stock sells for $65 and has a standard deviation of returns of 20 percent per year. The current risk free rate is 7% and a call option with a strike price of $60 expires in 3 months.

1. Using the Black-Scholes formula, what is the value of the call option?

2. if you found this option describe above selling for $1.50 less then what you calculated in part (a) above, would you want to buy it or sell it? Explain.

3. If you found a different option that had an exercise price of $55 and expired in 6 months, would you expect this option to have a higher or lower price than what you found in part (a). Explain without using any calculations.

Reference no: EM132018574

Questions Cloud

What is the new npv of the project : Incorporating these new values, and the real option, what is the new NPV of the project?

Identify a feature-length film that fits the genre : Identify a feature-length film that fits this genre and provide a basic summary of the movie. As you develop this summary, remember the differences.

What is the option worth today : what is the option worth today if the one year risk free rate is 5%. Use the binomial option pricing model to find this value.

Assess preparedness for an information systems leadership : Assess your preparedness for an information system's leadership and management position based on what you have learned in your graduate degree program.

Standard deviation of returns : A share of JMP stock sells for $65 and has a standard deviation of returns of 20 percent per year.

Describe a major theme of the movie : Describe a major theme of the movie you have selected using evidence from the movie itself as well as course resources and other scholarly sources to support.

Financing new business corporation : Write a 1-2 page essay considering the types of stock you might issue if you were financing a new business corporation.

Should they be accounted for in the same fund : In which funds would you report the transactions associated with the federal grant and school district match? Should they be accounted for in the same fund

How prominent are women administrators on your campus : How prominent are women administrators on your campus? Where do they hold power? How many of these women are women of color?

User Account

All Pages