Use daily compounding-find price of call option on the stock

Assignment Help Financial Management
Reference no: EM131058517

The current stock of a stock is $20. In one year the price will be either $26 or $16, the annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year (hint: use daily compounding)

Reference no: EM131058517

Questions Cloud

Open market operations-discount policy-reserve requirements : What changes in the organization and activities of the Federal Reserve Board would you suggest to improve its operations? Should the Fed be more or less powerful? Does having a regional bank system instead of one central bank make any difference in t..
Discuss policies on how supervisors must manage conflict : Discuss policies on how supervisors must manage conflict and confrontation between employees and between employees and supervisors
The future value of the ordinary annuity is : Find the future value of an ordinary annuity if payments are made in the amount R and interest is compounded as given. Then determine how much of this value is from contributions and how much is from interest. R= 9,000?; 9?% interest compounded semia..
Question on funtion of the vitellus in vertebrate eggs : What is the funtion of the vitellus in vertebrate eggs? How are these eggs classified according to the amount of vitellus wiyhin them?
Use daily compounding-find price of call option on the stock : The current stock of a stock is $20. In one year the price will be either $26 or $16, the annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year (hint: use daily compounding..
Describe to me what you learned from these empirical studies : In this section you will dive into your data and describe what you find. What does dialogue look like on the onlineforums you have selected? How is gender represented or signified in the video games you analyzed?
Example of representing beings : How are sponges characterized according to example of representing beings, basic  morphology, type of symmetry, embryonic (germ) layers an d coelom, digestive system, respiratory system, circulatory system, excretory system, nervous system and typ..
Should the firm conduct customer segment research : B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 60 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.24 million...
Earnings and dividends per share are expected to grow : Company Z’s earnings and dividends per share are expected to grow indefinitely by 5% a year. If next year’s dividend is $10 and the market capitalization rate is 8%, what is the current stock price?  Assume next year’s dividend is $10, the market cap..

Reviews

Write a Review

Financial Management Questions & Answers

  Bond issuer the option to redeem the bond

An agreement giving the bond issuer the option to redeem the bond at a specified price prior to maturity is the                 provision.

  Value of a bond in relation to annual discounting

What effect does the use of semi-annual discounting have on the value of a bond in relation to annual discounting?

  About the lockbox system

Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. hat is the maximum monthly cha..

  About the earnings per share

Assume a stock selling for $44.89 has a dividend yield of 3.1 percent and a PE ratio of 20.1. What is the earnings per share (EPS) for the company?

  Return on assets and return on common shareholders equity

When considering the difference between return on assets (ROA) and return on common shareholders' equity (ROE), Preferred dividends are deducted from the numerator when calculating ROE, but not when calculating ROA.

  What is the highest interest rate-refinance the mortgage

A homeowner took out a 30-year, fixed-rate mortgage of $310,000. The mortgage was taken out 10 years ago at a rate of 7.50 percent. If the homeowner refinances, the charges will be $2,500. What is the highest interest rate at which it would be benefi..

  Find the new portfolio beta

Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required return. The risk-free rate is 2.20%. You now receive another $4.50 million, which you invest in stocks with an average beta of 0.65. What is the required..

  How much will you be able to withdraw at end of five years

You deposit $2,300 into an account that pays 4% per year. Your plan is to withdraw this amount at the end of 5 years to use for a down payment on a new car. How much will you be able to withdraw at the end of 5 years? Round your answer to the nearest..

  Present value of the expected future stream of dividends

In 1965, Warren Buffett acquired control of a New England textile business called Berkshire Hathaway for about $10 a share. Today the stock sells for around $120,000 a share and Mr. Buffett is the wealthiest person in the United States. The stock has..

  About the growing annuity payments

You want to accumulate $3 millions by your retirement date, which is 25 years from now. You will make 25 deposits in your bank, with the first occurring today. The bank pays 7.82% interest, compounded annually. How much must your first deposit be to ..

  Gringottsltd manufactures a product known as the nimbus 500

gringottsltd manufactures a product known as the nimbus 500. a large number of other companies also manufacture the

  What was the holding period return for the stock

A stock has had returns of 17.52 percent, 12.36 percent, 6.36 percent, 27.82 percent, and −13.89 percent over the past five years, respectively. What was the holding period return for the stock?

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