The profit will be different from the butterfly spread

Assignment Help Accounting Basics
Reference no: EM13304327

If you create a butterfly spread using 3 put options, the profit will be different from the butterfly spread using 3 call options with the same strike prices.
True
False
A European call and a European put with the same underlying/expiration/strike price have the same implied volatility.
True
False
If the underlying pays no dividend, then the early exercise payoff of an American call option is always smaller than the remaining value of the option.
True
False
Higher risk-free rate increases the value of put options.
True
False
Suppose you are creating a butterfly spread using 3 put options with different strike prices. Currently, the put price with strike price of $40 is $6.99, the put with strike price of $50 is $11.06, and the put with strike price of $60 is $21.56. If the stock price becomes $62 at the option expiration, what will be the total profit from the butterfly spread?

The price of an American call on a non-dividend-paying stock is $4.3. The stock price is $42.65, strike price is $41, and the expiration date is in 3 months. The risk-free rate is 6%. What is the upper bound for the price of an American put on the same stock with the same strike price and expiration date?

Currently, a stock price is $52. Over each of the next 2 6-month periods it is expected to go up by 12% or down by 10%. The risk-free rate is 4% per annum with continuous compounding. What is the value of a 1-year European put option with a strike price of $50?

Suppose that put options on a stock with strike prices $45 and $55 cost $2 and $9, respectively. Use these options to create a bear spread. At what stock price at maturity will you break even? In other words, at what stock price, will you make $0 profit?

Currently the index is standing at 1,053. The risk-free rate is 4% per annum and the dividend yield is 1% per annum. A 6-month European put option on the index with a strike price of 1000 is trading at $35.49. What is the value of a 6-month European call option on the index with the same strike price?

A call option expiring in 62 trading days has a market price of $11. The current stock price is $60, the strike price is $50, and the risk-free rate is 0.03% per annum. Calculate the implied volatility.

34.48%

39.23%

44.20%

48.20%
Currently, a stock price is $80. It is known that at the end of 4 months it will be either $70 or $90. The risk-free rate is 6% per annum with continuous compounding. What is the value of a 4-month European put option with a strike price of $80?

A call option on a non-dividend-paying stock has a market price of $5.80. The stock price is $20, the strike price is $15, the time to maturity is 6 months, and the risk-free rate is 5% per annum. What is the implied volatility?

36.02%

40.13%

43.78%

47.15%
Suppose the current stock price is $50. At the end of 6 months it will be either $58 or $44. The risk-free interest rate is 3% per annum. What is the risk-neutral probability that the stock price will increase in 6 months? Report in percentage such as 55.55%.

A stock price is currently $25. At the end of 3 months, it will be either $30 or $20. The risk-free rate is 10% per annum with continuous compounding. Suppose S is the stock price at the end of 3 months. What is the today's value of a derivative that pays S2 in 3 months?

$664.81

$778.50

$639.26

$659.92
If the stock price is less than the strike price, one should exercises the American put option.
True
False
It's never optimal to early exercise an American put, if the underlying pays dividend.
True
False

Reference no: EM13304327

Questions Cloud

What is the firm''s wacc : Suppose a firm is funded 30% with debt (yield of 9%) and has a 32% tax rate. What is the (levered) cost of equity assuming the unlevered cost of equity is 12%? Round your answer to two decimal places.
Financial-gains or losses and market trends : Reports are typically associated with data that is useful for meetings, shareholders and sometimes public information. Organizing the information to make it understandable is one factor to consider, however there are reports that are very tedious inf..
The project npv if the initial outlay is $21 million : A project can generate unlevered cash flow of $3 million per year in perpetuity. Suppose the firm considering this project finances its operations with an equal mix of debt and equit
What is the firm''s wacc if the corporate tax rate is 35% : A firm has 1,000,000 shares of stock outstanding, and each share is currently worth $22. The stock has a beta of 1.2. The firm also has 10-year bonds outstanding with a par value of $10,000,000
The profit will be different from the butterfly spread : If you create a butterfly spread using 3 put options, the profit will be different from the butterfly spread using 3 call options with the same strike prices
What must total asset turnover be : A firm wishes to maintain an internal growth rate of 9.75 percent and a dividend payout ratio of 43 percent. The current profit margin is 6.5 percent and the firm uses no external financing sources.
A warehouse close to the business district : You have decided to cash in on the dancing craze in your town, so you are thinking aboutsetting up a dance studio. You can rent a warehouse close to the business district for $40000 p.a.
How will this impact retained earnings : XYZ Company has a net loss of $100,000 for the year and pays dividends of $30,000 to its shareholders. How will this impact Retained Earnings?
Three decimal places.$ million : What does the NPV become if the tax rate falls to 35%? Round your answer to three decimal places.$ million

Reviews

Write a Review

Accounting Basics Questions & Answers

  Gain or income recognizing the exchanges

What gain or income do Sara and Jane recognize on the exchanges? What is Wren corporation's basis in the property transferred by Sara and Jane? How does wren treat the value of the services Jane renders?

  Current market rates and bonds

If current market rates rise what will happen to the value of outstanding bonds?

  Amount deducted for depreciation on tax return

Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?

  Company''s stockholders equity

Barrett Company's stockholders' equity equals one-fourth of the company's total assets. The company's liabilities are $360,000. What is the amount of the company's stockholders' equity?

  Determine cost of completed-transferred out production

The beginning work in process inventory had a cost of $2,200. Determine the cost of completed and transferred out production, and the ending work in process inventory

  Financial statement cycles

When the auditor has the same level of willingness to risk that material misstatements will exist after the audit is finished for all financial statement cycles:

  Result of management fraud

During the course of the audit of FF Financial, you find that some accounting entries have been altered. You believe this may be the result of management fraud and you have determined that the effect of this could be material to the financial stat..

  Effects of stock dividend and stock split

Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and book value per share. Use the following column headings: Before Action, After Stock Dividend, and After Stock Sp..

  Prepare the entry to record the write-off

(a) Prepare the entries to record sales and collections during the period. (b) Prepare the entry to record the write-off of uncollectible accounts during the period.

  Inventoriable cost per unit by using variable costing

Marie's Decorating produces and sells a mantel clock for $100 per unit. In 20X5, 100,000 clocks were produced and 80,000 were sold. Other information for the year includes: What is the inventoriable cost per unit using variable costing?

  Total capital assets in the governmental activities

Expenditures were $3,000,000 in 2006 and $2,015,000 in 2007, including a change order in the amount of $15,000. What amount should be added to net capital assets in the governmental activities accounts in 2007?

  Expecting annual overhead costs

If annual overhead costs are expected to be $750,000 and direct labor costs are expected to be $1,000,000, then:

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