Find the price of put with same exercise price-same maturity

Assignment Help Financial Management
Reference no: EM132049772

Assume that the current stock price is $205. It may move up to $210 in the next three months and it may drop down to $200 in the next three months. Assume that the one month interest rate is 2% per annum and the exercise price is 205. (a) The following tree describes two possible paths for the stock price. Please fill in the contingent call option value of in the green cells (b) Describes a strategy that’s writes 100 calls and buys X shares by writing its value ,contingent on the stock price, in the blue highted cells © How many shares you should buy to achieve a certain payoff regardless whether the price move is up or down (d) Given the interest rate, find the equilibrium price of the call and explain why the call's price can't be higher or lower. ( e) Calculate the risk nuetral probability and use them to calculate the price of a call and a price of a put of three-months options on the above stock price (f) Use the probabilities in (e) to find the price of the call (g) Find the price of a put with the same exercise price and the same maturity.

Reference no: EM132049772

Questions Cloud

What are some reasons consumers created home networks : If you already have a home network, share with the class why you set up the network, how you use it and how does it benefit your life?
What rate must oxygen be suppliedto the burner : At what rate must oxygen be suppliedto the burner (at a temperature of 26* C and pressure of 742 mmHg)
Pressure will the volume of this sample : At what pressure will the volume of this sample be 5.99 L? Assume constant temperature and ideal behavior.
How much would be willing to lend the business owner : Present Value of Multiple Annuities A small business owner visits his bank to ask for a loan. The owner states that he can repay a loan at $1,800 per month.
Find the price of put with same exercise price-same maturity : Use the probabilities in to find the price of the call, Find the price of a put with the same exercise price and the same maturity.
Region of spectrum for electromagnetic radiation : A: What would be the region of spectrum for electromagnetic radiation? B: Find the speed of this electron?
Prepare a well-researched project planning document : The major group project assignment should include various phases of a project life cycle, such as initiating, planning, executing and closing a project.
Relationship between job costing and activity based costing : What is the common relationship between job costing, activity based costing, master budget, and responsibility
What is the discount rate associated with the stock : When presented with an investment opportunity, Jospeh knows that calculating the interest rate associated with that investment is really imprtant.


Write a Review


Financial Management Questions & Answers

  Present value of after-tax terminal value after three years

Calculate the nominal after-tax net returns at the end of year 2. What is present value of the after-tax terminal value after 3 years?

  The difference is the real rate of interest

Suppose you see the following rates in the marketplace: 10-year T-bond with a 4.56% yield, 10-year corporate bond with S&P rating of AAA with a 6.67% yield, and a 10-year corporate bond with S &P rating of BBB with an 8.32% yield. The difference is t..

  What is the value of the merger

What is the value of ABC following the merger?

  Which firm is exposed to most exchange rate risk

Based on this information, which firm is exposed to the most exchange rate risk? Explain.

  Personal balance sheet and personal cash flow statement

Explain the difference between a personal balance sheet and a personal cash flow statement. What are their main components and how do they differ in terms of th

  Compute the ratios and metrics

Compute the ratios and metrics given the following information on Hospital XYZ:

  What is expected return on the firms debt

What is the expected return on the firms debt? What would be the expected return on equity in Mellors had no debt?

  What is the annual payment on loan for cooley landscaping

What is the annual payment on this loan for Cooley Landscaping?

  What are the consequences of given actions

Based on his balance, Paul writes a check for a new stereo for $241.00. Paul has no intention of making a deposit in the near future. What are the consequences of his actions?

  Planning to buy call option on the stock

You are planning to buy a call option on the Archer Inc. stock. The volatility or risk of this stock (sigma) is 20% and the risk free rate?is 10%.

  What is percent rate of return-present value of perpetuity

What is the present value of a perpetuity of $4,887 if the discount rate is 10.26%? How long will it take to double your money at an annually compounded interest rate of 8.4%? If you pay $1,463 for a perpetuity of $135, what is your percent rate of r..

  Medical expenses was paid by her insurance policy

How much of Christina’s direct medical expenses was paid by her insurance policy

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