User Account

All Pages

What is the intrinsic value of the put option

Assignment Help Corporate Finance
Reference no: EM13672693

Question 1:

On October 29, 2011, a call option on AMETEK Inc. (AME) with an exercise price $50.00 expiring on Dec 17, 2011 was traded at $4.30 and a put option at $0.70. AMETEK Inc. stock was trading at $54.05.

A) What is the intrinsic value of the call option?

B) What is the intrinsic value of the put option?

C) What is the time value of the call option?

D) What is the time value of the put option?

Question 2: (Binomial Option pricing)

Consider a two-period binomial model in which a stock trades currently at $44. The stock price can go up 6% or down 6% each period. The risk free rate is 2%.

A) Calculate the price of a call option expiring in two periods with an exercise price of $45.

B) Calculate the price of a put option expiring in two periods with an exercise price of $45.

C) Based on your answer in A), calculate the number of units of the underlying stock that would be needed at t=0 in the binomial tree to construct a risk-free hedged portfolio which includes 10,000 calls.

Question 3: (B-S Option Pricing)

ABC stock is being traded at $115 today. Consider European put and call options with an exercise price of $110. The option expires in 91 days and the volatility is 0.50. The risk-free rate (continuously compounded) is 2.5%.

A) Calculate the values of the put and call options. Assume there will be no dividend before the option expires.

B) Calculate the values of the put and call options, but assume now the continously compounded dividend yield is 2%.

Reference no: EM13672693

Questions Cloud

Taxable income using the cash method of accounting. : Related Party Transactions. Sally is an attorney who computes her taxable income using the cash method of accounting.
Business as a partnership or a corporation : Business as a partnership or a corporation
The unit cost of goods transferred : The unit cost of goods transferred in from Department X is $1.80.
Desire to reenergize the workforce : Given the board of directors' desire to reenergize the workforce, what advice would you provide for creating a leadership strategy? What leader behaviors should nursing home directors and nurse supervisors demonstrate?
What is the intrinsic value of the put option : Calculate the values of the put and call options and calculate the values of the put and call options, but assume now the continously compounded dividend yield is 2%.
Explain whether anthonys orchard should invest : Explain how purchase of the apple press might affect the company's revenue goals. Based on this information, explain whether Anthony's Orchard should invest in the apple press.
What is the importance of law of supply : What is the importance of law of supply
Website for a labview program : A Labview program that measures a lot of different things such as voltage, current , temperature , watt, etc - you need to have a website that displays these data for an easier access.
Explain the principal of operation of a ph analyzer : Explain the principal of operation of a pH analyzer and why does temperature affect pH Measurement?

Reviews

Write a Review

Corporate Finance Questions & Answers

  Ratios and financial planning at east coast yachts

Create an inventory ratio calculated as inventory divided by current liabilities. How would you interpret this ratio? How does East Coast Yachts compare to the industry average for this ratio?

  1 missing trading ltd purchased a business delivery

1 missing trading ltd purchased a business delivery vehicle on the 1 of january 2009 for r120 000. calculate the

  Design an arbitrage profit taking strategy

Estimate the value of your position now. Assume the forward contracts are priced such that no arbitrage profit making opportunities exist and design an arbitrage profit taking strategy and show the amount of the profit your strategy will produce.

  Evaluate the optimal level of investment for a household

Evaluate total savings in each period.  Is the Investment/Saving market at equilibrium in each period?

  What price would you bid

Assume that the relevant tax rate is 34 percent. If the no lift security company requires 10 % return on its investments what price would you bid?

  Polycorp wishes to make a three for one stock split each

polycorp wishes to make a three for one stock split each share will be replaced by three shares. the current share

  What the pension fund should be to finance retirement

What the pension fund should be to finance our retirement. Second, what annual savings should we accumulate from years 30 to 40 to be able to fund all the aforementioned expenses and our retirement.

  How the expected return varies with beta

Draw a graph showing how the expected return varies with beta, what is the market risk premium and what is the required rate of return on an investment with a beta of 1.5?

  Difference between the coupon rate and the ytm of bonds

What coupon rate should AirJet Best Parts set on its new bonds to sell them at par value and what is the difference between the coupon rate and the YTM of bonds - what factors will contribute to the riskiness of these bonds? Explain in detail your ra..

  Liam chan is 25 years and a recent graduate of jmsb he

liam chan is 25 years and a recent graduate of jmsb. he works for the bank of montreal as a junior account manager

  Financial capital in the selected firm as a shareholder

The financial analysis report must be written properly. They must include a title page, a table of contents, and a reference page. For both midterm and final report, information sources from the web, etc. must be cited properly, using APA style.

  Problem 1at the beginning of 20x2 dahl ltd acquired 8 of

problem 1at the beginning of 20x2 dahl ltd. acquired 8 of the outstanding common shares of tippy ltd. for 400000. this

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd