Calculate the price of put option

Assignment Help Financial Management
Reference no: EM131892093

Assume that on October 27, the Nokia Corporation’s stock traded at $15.36. At the time the stock price was quoted, the most actively traded option for this stock was a call option with November maturity and a strike price of $17.50, which had exactly 30 days until expiration. Assume a US Treasury Bill with the same maturity had an annualized return of 1.20%. The variance of the stock price is 10% annually. You can assume that options for Nokia have European type exercise structure. a) Calculate the Black-Scholes price for the call option described above. b) Calculate the price of a put option that has the same strike price and maturity as the call option above. c) If the call option described above trades for $0.1 in the market, what would you expect the market price of the same call option to be if the stock price increases to $16.15?

Reference no: EM131892093

Questions Cloud

Radio station broadcasting : Your favorite AM radio station broadcasts at a frequency of 1,231 kHz. On what wavelength is the radio station broadcasting.
What is the frequency of the laser light : A beam of laser light has a wavelength of 584 nm. What is the frequency of the laser light?
What is the wavelength of the wave : A wave is traveling with a speed of 60.2 m/s and it has a frequency of 46.6 Hz. What is the wavelength of the wave?
Describe what was studied in the article : Use the Capella library to find a journal article that examines a quantitative study (not a qualitative study). Post a link to the article.
Calculate the price of put option : Calculate the price of a put option that has the same strike price and maturity as the call option above.
How you intend to promote your products or service : Explain how you intend to promote your products or service. Explain your channels of distribution; How you intend to get the products or services to customers.
How many children-students and adults attended : There are half as many adults as there are children. If the total ticket sales was $1156, How many children, students, and adults attended?
How would you characterize your organization culture : I490 04 Assignment: CULTURE. How would you characterize your organization's culture? What "unwritten rules" have you picked up so far
Find the social security and medicare taxes on gross earning : Find the social security and medicare taxes on gross earnings of $498.00. Assume a 6.2% FICA rate and a 1.45% medicare rate.

Reviews

Write a Review

Financial Management Questions & Answers

  Good employee with near perfect attendance record

A good employee with a near perfect attendance record has suddenly been missing 2-3 days of work per week. His supervisor has repeatedly told him he must be at work daily, or he will be fired. Now, the supervisor wants to fire him, but has come to as..

  Earnings per share when economy expands or enters recession

RAK, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are projected to be $36,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percen..

  Find bond value-current yield-capital gains yield next year

An unconventional bond offers a coupon rate of 5% for the first 5 years of the bond and 7% for the remaining 8 years of the bond. Face value is $1,000 and the yield to maturity is 8%. Find bond value, current yield, and capital gains yield this year...

  What would the value be if payments occurred forever

An investment offers $5,800 per year for 20 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment? What would the value be if the payments occurred for 45 years? What would..

  Proceeds will be used to repurchase shares of stock

Pendergrast, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $32,000 if economic conditions are normal.  The proceeds will be used to repurchase shares of stock. There ..

  Standard deviation of a stocks returns

If the standard deviation of a stock's returns over the last 12 quarters is 4 percent, and if there is no perceived change in volatility, there is a ____ percent probability that the stock's returns will be within ____ percentage points of the expect..

  Minimum level of earnings before interest and taxes

Holly's is currently an all equity firm that has 9,000 shares of stock outstanding at a market price of $45 a share. The firm has decided to leverage its operations by issuing $120,000 of debt at an interest rate of 9.5 percent. What is the minimum l..

  Expectation to be consistent with the CAPM

You are thinking of buying a stock priced at $105 per share. Assume that the risk-free rate is about 5.5% and the market risk premium is 6.8%. If you think the stock will rise to $124 per share by the end of the year, at which time it will pay a $1.9..

  What would be the present value

What is the present value of an ordinary annuity of $1000 per year for 7 years discounted back to the present at 10 percent? What would be the present value if it were an annuity due? What are the steps used to arrive here?

  What is price per share of the company stock

Ward Corp. is expected to have an EBIT of $2,500,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $177,000, $109,000, and $127,000, respectively. What is the price per share of the company's st..

  Shares outstanding-market-to-book ratio

In November 2009, Mises Co. had a share price of $40.20. They had 90.33 million shares outstanding, a market-to-book ratio of 4.00. In addition, Mises had $850.01 million in outstanding debt, $165.00 million in net income, and cash of $250.09 million..

  What is present value of cash flows

What is the present value of the cash flows?

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