Calculate the current market price of a call option

Assignment Help Financial Management
Reference no: EM131316682

A stock currently sells for $36. In the next six months, the stock will either go up to $42 or it will fall to $31.

If the risk-free rate is 4 percent per year, calculate the current market price of a call option on this stock, with an expiration date in six months and a strike price of $35.

Reference no: EM131316682

Questions Cloud

Analyze ethical scholarship in accurate representation : Write in a clear, concise, and organized manner; demonstrate ethical scholarship in the accurate representation and attribution of sources; and display accurate spelling, grammar, and punctuation.
Does the otr time appear to be stable why or why not : The data in below table lists country code and the order to remittance (OTR) time for hardware / software installations for the last 76 installations (from first to last). Does the OTR time appear to be stable? Why or why not
What more desire around as much alternately her methodology : Similarly, as parts clash style comprises a behavioral introduction What's more desires around as much alternately her methodology of the clash.
Describe any prior knowledge or focus from previous learning : Identify essential questions and/or unit objective(s) addressed by this lesson.How is anxiety disorders connected to lack of mental development?What are the main causes of anxiety disorders among the 6-12 age groups?Connect the performance indicators..
Calculate the current market price of a call option : If the risk-free rate is 4 percent per year, calculate the current market price of a call option on this stock, with an expiration date in six months and a strike price of $35.
Explain why an option is a derivative security : Explain why an option is a derivative security.-  Is buying an option more or less risky than buying the underlying stock?
Impact on aggregate planned expenditure : Draw an appropriate diagram to show how a change in disposable income is likely to impact on aggregate planned expenditure.
Primary advantage of settling options contracts in cash : Suppose you want to invest in a particular company. What are the pros and cons of buying the company's shares versus buying their options?
Conduct job analysis of the customer service representative : Examine at least three (3) approaches that you can take as the HR manager to conduct a job analysis of the Customer Service Representative position

Reviews

Write a Review

Financial Management Questions & Answers

  Expected EPS also maximizes price per share of common stock

The capital structure that maximizes expected EPS also maximizes the price per share of common stock. The capital structure that minimizes the interest rate on debt also maximizes the expected EPS. One defect of the IRR method vs. the NPV is that the..

  Which inventory policy should el ma adopt for the product

Make an ABC classification (80-10-10) of the products by their monthly sales and by monthly average stock values, respectively. Which inventory policy should El.Ma adopt for the product named 'locking release 24V'?

  What will the value of the firm be if company takes on debt

Cavo Corporation expects an EBIT of $17,100 every year forever. The company currently has no debt, and its cost of equity is 10 percent. The corporate tax rate is 35 percent. What will the value of the firm be if the company takes on debt equal to 50..

  Compute the penalty that the agent can impose

Compute the penalty that the agent can impose if he concludes that the improper deduction was due to Ms. Hsui's negligence in preparing her tax return. Compute the penalty that the agent can impose if he concludes that the improper deduction represen..

  Read the journal article avlonitis g j amp indounas k a

read the journal article avlonitis g. j. amp indounas k. a. 2005 pricing objectives and pricing methods in the services

  Optimal cash return point

Hot Foot Shoes would like to maintain its cash account at a minimum level of $40,000, but expects the standard deviation in net daily cash flows to be $5,500, the effective annual rate on marketable securities to be 6.0 percent per year, and the trad..

  What is the price and expected rate of return of the bond

Calculate price of a bond with a par value of $1,000 with a $50 coupon (paid annually) and matures in 5 years. What is the price and Expected rate of return of the bond after the first coupon payment is made?

  Underwritten agreement and best efforts arrangement

Last year Nowitzki inc. entered into an agreement with Duncan partners, an investment bank. At the time of issue, Duncan Partners has agreed to purchase all offered shares from Nowitzki and then try to sell all shares in the primary market.

  What is your behavior toward buying stocks on margin

What is your behavior toward buying stocks on margin? What is the risk associated with this strategy?- Summarize the main points of the article.

  Market interest rate increases

An investor wants to find the duration of a 25-year, 8% semiannual pay, noncallable bond that's currently priced in the market at $901.19, to yield 9%. using a 50 basis point change in yield, Calculate new price of the bond if the market interest rat..

  About the financial leases

About the Financial Leases

  Part a consider the information below from a firms balance

part a consider the information below from a firms balance sheet for 2011 and 2012.current assets20122011change cash

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