Black-scholes-merton formula

Assignment Help Finance Basics
Reference no: EM131044440

Suppose you hold LLL employee stock options representing options to buy 11,600 shares of LLL stock. LLL accountants estimated the value of these options using the Black-Scholes-Merton formula and the following assumptions:

S = current stock price = $21.99
K = option strike price = $22.5
r = risk-free interest rate = .046
σ = stock volatility = .22
T = time to expiration = 3.5 years

You wish to hedge your position by buying put options with three-month expirations and a $25 strike price. How many put option contracts are required? (Note that such a trade may not be permitted by the covenants of many ESO plans. Even if the trade were permitted, it could be considered unethical.) (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Reference no: EM131044440

Questions Cloud

Share on facebookshare on twitter : Apple Inc.'s share decline Wednesday wiped almost $43 billion off the iPhone-maker's market value in just one hour. That's more than the entire market capitalization of multinationals such as Deutsche Bank AG and Glencore Plc, as well as technolog..
Write a paper that analyze the personalities of hyde : Write a three pages double spaced paper that Analyze the personalities of Hyde from the book Dr. Jekyll and Mr.Hyde, the Invisible Man, and Frankenstein's monster.
Global economic and financial developments : The Federal Open Market Committee omitted previous language that "global economic and financial developments continue to pose risks," instead saying officials will "closely monitor" such developments, according to a statement released Wednesday fo..
Write an essay about new harrison bergeron : Write an essay about New "Harrison Bergeron"(suggested. Well, I haven't thought of a good topic so that this one probably would not be my final decision).
Black-scholes-merton formula : Suppose you hold LLL employee stock options representing options to buy 11,600 shares of LLL stock. LLL accountants estimated the value of these options using the Black-Scholes-Merton formula and the following assumptions:
What is the price of the put option : A stock with a current price of $67 has a put option available with a strike price of $65. The stock will move up by a factor of 1.31 or down by a factor of .84 over the next period and the risk-free rate is 3 percent. What is the price of the put..
Find the latest enterprise value : 1. Use information from the www.finance.yahoo.com website to find the latest Enterprise Value (EV) for IBM (use the Close Price for December 31, 2014 and the December 31, 2013 financials reported). Please show the calculations and r..
What is the question that the researchers are attempting : What is the question that the researchers are attempting to answer? How does this question fit into the research that has already been done in that area? Why is it important?
Enhanced the critical-thinking skills used by the agency : A description of the use of technology by the selected agency: for example, the use of computers, smartphones, and social media An evaluation of how technology has enhanced the critical-thinking skills used by the agency

Reviews

Write a Review

Finance Basics Questions & Answers

  Samuelsons has a debt-equity ratio of 43 percent sales of

samuelsons has a debt-equity ratio of 43 percent sales of 10000 net income of 1700 and total debt of 8700. what is the

  What are the main differences between credit analysis and

what are the main differences between credit analysis and equity analysis? how do these impact the financial statement

  Discuss the credit process with companies

Discuss the credit process with companies looking to borrow money. What credit application criteria do you think banks give the most consideration? How hard is it for a new company to get a loan?

  If the last interest payment was made 3 months ago and the

a coupon bond pays semi-annual interest is reported as having an ask price of 97 of its 1000 par value in the wall

  Describe the concept of time value of money

Explain the concept of Time Value of Money (TVM). What are its components? why is it a foundational principle of finance?

  What is the horizonn value at 2012

Current and projected free cash flows for Radell global operations are shown below. growth is expected to be constant after 2012, and the weighted average cost of capital is 11% what is the horizonn (continuing) value at 2012?

  How much must joe set aside today to meet the settlement

Patricia and Joe Payne are divorced. the divorce settlement stipulated that joe pay $525 a month for their daughter Suzanne until she turns 18 in 4 years. How much must Joe set aside today to meet the settlement? Interest is 6% a year.

  The companys last dividend was 150 wheeler has a beta of 16

wheeler inc. is presently in a stage of abnormally high growth because of the excess demand for widgets. the company

  List and explain the points of financial impact on a

list and explain the points of financial impact on a company if it raises the credit standards required of its

  What is the required return

1. Dividend payment is $2.85, Dividend Growth Rate is 4.50%, and ZYX Stock price is $84. What is the Required Return=

  What is the amount of the depreciation expense

Black River Adventures has net income of $1,718, interest expense of $815, sales of $19,950, and costs of $11,080. What is the amount of the depreciation expense if the firm's tax rate is 35 percent?

  West corporation orders 4000 units of a product at the

west corporation orders 4000 units of a product at the beginning of the period for 7 each. what is west corporations

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