What does delta represent in this setting

Assignment Help Finance Basics
Reference no: EM13265264

A stock price is currently $80. It is known that at the end of four months it will be wither $75 or $88. The risk free rate is 6 percent per annum with continuos compounding. What is the value of a four-month European put option with a strike price of $80? Use no-arbitrage arguments.

What is the delta of this option and what does delta represent in this setting?

 

Reference no: EM13265264

Questions Cloud

The advantages of having a common currency as well : Canada, Mexico, and the United States have a free trade zone. What would be some of the advantages of having a common currency as well? The disadvantages? Do you think it would be a good idea? Why or why not?
What is the maximum speed of a point on the string : A wave on a string is described by D(x,t)=(2.00cm)sin[(12.57rad/m)x?(638rad/s)t],where x is in m and t is in s. The linear density of the string is 5.00g/m, What is the maximum speed of a point on the string
What is the value of a nine month european call : What is the value of a nine month European call on the futures with a strike price of 26?
Write argumentative essay about saudi woman : Write argumentative essay about Saudi woman and why some people want her to drive and other do not.
What does delta represent in this setting : What is the delta of this option and what does delta represent in this setting?
Design a buck converter to produce an output voltage : Design a buck converter to produce an output voltage of 18 V across a 10- load resistor. The output voltage ripple must not exceed 0.5 percent. The dc supply is 48 V. Design for continuous inductor current.
What is the value of a six month european call option : What is the value of a six month European call option on the futures with a strike price of 60? If the call were American would it ever be worth excerising it early?
What was the rate of return on the investment : An investment of $100,000, increased to $168,510 over a 5 year period. What was the rate of return on the investment?
What is the value of a sux month put option on the index : The risk free rate is 8% and the dividend yield on the index is 3%. What is the value of a sux month put option on the index with a strike price of 300 if it is a) European and b) American?

Reviews

Write a Review

Finance Basics Questions & Answers

  Computation of net present value of investment

Computation of net present value of investment where The prevailing interest rate is 6%

  Describe weighted average cost of capital

Describe the entire process of finding the Weighted Average Cost of  Capital - Difference between the types of inventory and inventory management systems used by firms and explain what determines the optimal inventory level.

  What is the gain or loss on the futures contract

The face value of the bond is $1000, and the semi-annual coupon payments are $30. The annual coupon rate on the bonds is $60 per bond (or 6%). The futures contract has 100 bonds.

  Find the value of common stock

A security analyst forecasts dividends of Kalpert Enterprises for the next 3 years. Her forecast is D1=$1.50, D2=$1.75, and D3=$2.20. She also forecasts a price in 3 years of $48.50.

  Compute the break-even point in units

Shock Electronics sells portable heaters for $25 each unit, and the variable cost to produce them is $17. Mr. Amps estimates that the fixed expenses are $96,000.

  Compute the target debt equity ratio

Fama's Llamas has a WACC of 10.2%. The company's costs of equity is 14%, and its pertax cost of debt is 8.4 percent.

  Show entries in general journal form for the transactions

Finance,Accounts Receivable,Bonds ,revenue expenditure - Show entries in general journal form for the following transactions for a certain public university

  What is the expected capital gains yield

The next dividend payment by Wyatt, Inc., will be $3.40 per share. The dividends are anticipated to maintain a growth rate of 7.75 percent, forever. Assume the stock currently sells for $50.40 per share.

  Calculate the cost of leasing the equipment

Reynolds Corporation plans to purchase equipment at a cost of $3 million. The company's tax-rate is 30 percent and the equipment's depreciation would be $600,000 per year for 5 years.

  Explain the term bond valuation

Explain the term Bond valuation and What is the annual interest payment on the second issue

  Computing current price of the stock

A Corporation will pay a $2 per share dividend in one year. The dividend in 2 years will be $4 per share, and it is expected that dividends will grow at 5% per year thereafter.

  Evaluation of foreign currency

Computation of Foreign Currency - Hedging with forward contracts and find the variance of the dollar price of this asset if the U.S. firm remains unhedged against this exposure?

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