What is the expected return of the put option

Assignment Help Financial Management

Reference no: EM131907353

Harbin Manufacturing has 10 million shares outstanding with a current share price of $20.36 per share. In one year, the share price is equally likely to be $28 or $19. The risk-free interest rate is 5%. a. Using the risk-neutral probabilities, what is the value of a one-year call option on Harbin stock with a strike price of $25. b. What is the expected return of the call option? c. Using the risk-neutral probabilities, what is the value of a? one-year put option on Harbin stock with a strike price of $25 d. What is the expected return of the put option?

Reference no: EM131907353

Questions Cloud

What is the total intrinsic value of the option premium : What is the total intrinsic value of the option premium? What is the per pound intrinsic value of the premium?

Determine the? black-scholes value of one-year : The? risk-free interest is 4%. Determine the? Black-Scholes value of a? one-year, at-the-money call option on Roslin stock.

How can multinational private equity and alternative asset : How can multinational private equity and alternative asset management company like Blackstone Group hedge following risks to limit their loses in adverse cases?

How would this affect businesses and the economy : what products might you no longer be able to obtain in (Costa Rica) or any country in Central America? How would this affect businesses and the economy?

What is the expected return of the put option : what is the value of a one-year put option on Harbin stock with a strike price of $25. What is the expected return of the put option?

How do the convertible bonds help reduce agency costs : Paul Duncan, financial manager of EduSoft Inc., is facing a dilemma. How do the convertible bonds help reduce agency costs?

What is the total value after the announcement : What is the total value of the company before the announcement? What is the total value after the announcement?

What is the average return for stock over five year period : If the returns on Stock A are as follows: Year 1 return = 29 %, Year 2 return = -4 %, what is the average return for Stock A over this 5 year period?

Impact on fraudulent accounting practice on free market : What is the impact on fraudulent accounting Practice on the free market.

User Account

All Pages