Calculate the value of a six-month european call option

Assignment Help Business Management
Reference no: EM132710184

A stock price is currently $50. It is known that at the end of six month, it will be either $60 or $40. The risk-free rate of interest with continuous compounding is 12% per annum. Calculate the value of a six-month European call option on the stock with an exercise price of $45, using binomial model and (a) no-arbitrage argument, and (b) risk-neutral valuation approach.

Reference no: EM132710184

Questions Cloud

Find how to record in financial statement : During the year ended 30 June 2009 Adeje Ltd decided to buy back some of its ordinary shares. How to record this in financial statement?
Calculate the wacc of abc company : ABC company has bond outstanding of 100,000 selling at par. Similar bonds in the market have a yield rate of 7.5%. In its capital structure, the company
How changes in working capital can be a source of cash : Discuss the relationships among the different financial statements. What is free cash flow?
Find how to record in financial statement : During the year ended 30 June 2009 Adeje Ltd decided to buy back some of its ordinary shares. How to record this in financial statement?
Calculate the value of a six-month european call option : Calculate the value of a six-month European call option on the stock with an exercise price of $45, using binomial model and (a) no-arbitrage argument
Determine what are the journal entries for the transactions : Sunny Corporation was organized on January 2, 2018 with 100,000 ordinary shares. What are the journal entries for the above transactions?
Relationship between capital and risk exposure : Examine the relationship between capital and risk exposure among financial service providers.
Function of the share price at expiration : 1. You own a put option on a Brambles share with an exercise price of $10. The option will expire in exactly six months' time.
What is the present value of perpetual tax shield : Miller Ltd has $12,000 of debt outstanding that is selling at par and has a coupon rate of 8%. The tax rate is 30%. What is the present value of perpetual tax s

Reviews

Write a Review

Business Management Questions & Answers

  Caselet on michael porter’s value chain management

The assignment in management is a two part assignment dealing 1.Theory of function of management. 2. Operations and Controlling.

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. Due to increase in the preference for light beer drinkers, Chris Prangel wants to introduce light beer version in Mountain Man. An analysis into the la..

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. An analysis into the launch of Mountain Man Light over the present Mountain Man Lager.

  Analysis of the case using the doing ethics technique

Analysis of the case using the Doing Ethics Technique (DET). Analysis of the ethical issue(s) from the perspective of an ICT professional, using the ACS Code of  Conduct and properly relating clauses from the ACS Code of Conduct to the ethical issue.

  Affiliations and partnerships

Affiliations and partnerships are frequently used to reach a larger local audience? Which options stand to avail for the Hotel manager and what problems do these pose.

  Innovation-friendly regulations

What influence (if any) can organizations exercise to encourage ‘innovation-friendly' regulations?

  Effect of regional and corporate cultural issues

Present your findings as a group powerpoint with an audio file. In addition individually write up your own conclusions as to the effects of regional cultural issues on the corporate organisational culture of this multinational company as it conducts ..

  Structure of business plan

This assignment shows a structure of business plan. The task is to write a business plane about a Diet Shop.

  Identify the purposes of different types of organisations

Identify the purposes of different types of organisations.

  Entrepreneur case study for analysis

Entrepreneur Case Study for Analysis. Analyze Robin Wolaner's suitability to be an entrepreneur

  Forecasting and business analysis

This problem requires you to apply your cross-sectional analysis skills to a real cross-sectional data set with the goal of answering a specific research question.

  Educational instructional leadership

Prepare a major handout on the key principles of instructional leadership

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