Required: a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $135 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now?
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- The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $145 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $145 is $8.19. Required: a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $145 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Complete this question by entering your answers in the…The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $95 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $95 is $6.00. Required: a. If the semiannual risk-free interest rate is 5%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $95 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Complete this question by entering your answers in the tabs…The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $40 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $40 is $8.49. Required: If the semiannual risk-free interest rate is 3%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $40 if it is at the money? (The stock pays no dividends.) What would be a simple options strategy using a put and a call to exploit your conviction about the stock price’s future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now?
- The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $85 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $85 is $8.00. Required: a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $85 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Complete this question by entering your answers in the tabs…The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $50per share for months, and you believe it is going to stay in that range for the next 3 months. Theprice of a 3-month put option with an exercise price of $50 is $4.a. If the risk-free interest rate is 10% per year, what must be the price of a 3-month call optionon C.A.L.L. stock at an exercise price of $50 if it is at the money? (The stock pays nodividends.)b. What would be a simple options strategy using a put and a call to exploit your convictionabout the stock price’s future movement? What is the most money you can make on thisposition? How far can the stock price move in either direction before you lose money?c. How can you create a position involving a put, a call, and riskless lending that would havethe same payoff structure as the stock at expiration? What is the net cost of establishing thatposition now?The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $105 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $105 is $12.86. a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of a 3-month call option
- Consider a call option on Stock X. The call expires in 7 months and has a strike price X=$22. The current price of stock X is $20. In 7 months, the stock price can either go up to 23 (up state) or go down to $19 (down state). The call premium in the 2 states : $1 in the up state and $0 in the down state. Assume that the risk-free rate is 12% per annum. Calculate the hedge ratio. (Please report your answer using 2 decimals) Continuation of Question 1.Calculate the value of the call in period 0. (Hints: Use continuous discounting when calculating present value. Also, please report your answer using 4 decimals)The current price of a stock is $15. In 6 months, the price will be either $18or $13. The annual risk-free rate is 6%. Find the price of a call option on thestock that has a strike price of $14 and that expires in 6 months. (Hint: Usedaily compounding.)You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $102 at year-end. XYZ currently sells for $102. Over the next year, the stock price will increase by 7% or decrease by 7%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. Suppose the desired put option were traded. How much would it cost to purchase? b. What would have been the cost of the protective put portfolio? c. What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with X=102? Show that the payoff to this portfolio and the cost of establishing the portfolio match those of the desired protective put. Complete this question by entering your answers in the tabs below. Required A Required B Required C What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with…
- XYZ Corporation will pay a $2 per share dividend in two months. Its stock price currently is $80 per share. A European call option on XYZ has an exercise price of $75 and 3-month time to expiration. The risk-free interest rate is 0.95% per month, and the stock's volatility (standard deviation) - 18 % per month. Find the Black-Scholes value of the option. (Hint: Try defining one "period" as a month, rather than as a year, and think about the net-of-dividend value of each share.) Note: Round your answer to 2 decimal places. Black-Scholes value of the optionYou would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $108 at year-end. XYZ currently sells for $108. Over the next year, the stock price will increase by 12% or decrease by 12%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. Suppose the desired put option were traded. How much would it cost to purchase? b. What would have been the cost of the protective put portfolio? c. What portfolio position in stock and T-bills will ensure you a payoff equal to the payoff that would be provided by a protective put with X=108? Show that the payoff to this portfolio and the cost of establishing the portfolio match those of the desired protective put. Complete this question by entering your answers in the tabs below. Required A Required B Required C Suppose the desired put option were traded. How much would it cost to purchase? Note: Do not round intermediate calculations. Round your…Suppose ABC's stock price is currently $25. In the next six months it will either fall to $15 or rise to $40. What is the current value of a six-month call option with an exercise price of $20? The six-month risk-free interest rate is 5% (periodic rate). [Use the riskneutral valuation method]A. $20.00 B. $8.57 C. $9.52 D. $13.10