+1-415-670-9189
info@expertsmind.com
Calculate the total cost of the collar that marie is intrst
Course:- Finance Basics
Reference No.:- EM131140450




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Finance Basics

An investor is said to take a position in a "collar" if he buys the assets, buys an out-of-the-money put option on the asset, and sells an out-of-money call option on the asset. The two options should have the same time to expiration. Suppose Marie wishes to purchase a collar on Hollywood, Inc., a non-dividend-paying common stock, with six months until expiration. She would like the put to have a strike price of $50 and the call to have a strike price of $120.00. The current price of Hollywood's stock is $80 per share. Marie can borrow and lend at the continuously compounded risk-free rate of 10 percent per annum, and the annual variance of Hollywood's continuously compounded returns is 0.25. Use the Black-Scholes model to calculate the total cost of the collar that Marie is interested in buying




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Finance Basics) Materials
"Assuming that everything else remains constant, a decrease in the test's level of significance (α) leads to a higher probability of rejecting the null hypothesis." - Is thi
(a) Given that a senior citizen suffers from anxiety, what is the probability that he or she also suffers from sleep disorder? (b) Find the probability that a senior citizen s
There are plenty of financing options, including: common stock, preferred stock, debt (many debt options), bank loans, and internal cash. Is there one financing mix that is
Wages and salaries total $30,000 per month plus 5 percent of monthly sales. The firm expects to make a tax payment of $60,000 in the first month and a $45,000 purchase of fi
What range of preload would you expect to encounter when that torque is applied to a production quantity of this joint; assuming perfect tools and operators? What might that
What is the value of a share of preferred stock that pays a $9.50 dividend, assume k is 12%. Charlie's board of directors declared a dividend of $1.85 yesterday. What should a
Kaw Valley Mining is contemplating investing in a coal mine. An investment of $1,500,000 would be made for one year with the potential outcomes. What is the expected rate of
If Suzie chooses $1,100 cash back to buy the premium Mustang convertible and borrows $32,900 from the VTech Credit Union at 7.7 percent APR for 72 months, how much will her