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What is the theoretical fair value of the october 165 call

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Let the standard deviation of the continuously compounded return on the stock be 21 percent. Ignore dividends. Answer the following:

a. What is the theoretical fair value of the October 165 call? Calculate this answer by hand and then recalculate it using BSMbin8e.xls.

b. Based on your answer in part a, recommend a riskless strategy.

c. If the stock price decreases by $1, how will the option position offset the loss on the stock?

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This is a calculation on fair and theoretical value of calls and strategies on using calls. The project has been done using Microsoft word.

Reference no: EM131291135

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inf1291135

3/2/2017 4:49:47 AM

I attached the question that I have to answer. it's similar to what I found here except second question ( B ). So, I attached the exact question to make sure the answer is right. Also I attached the BSMbin8e.xls Respectfully, 21267554_2Exam1 Take-Home Spring 2017.pdf This is BSMbin8e.xls 21267548_1BSMbin8e.xls I have made the payment. please make sure that the solution is correct 100% as it required for A,B and C.

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