Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price $104 are selling at an implied volatility of 28%. ExxonMobil stock price is $104 per share, and the risk-free rate is 6%. a. If you believe the true volatility of the stock is 30%, would you want to buy or sell call options? Buy call options Sell call options b. Now you want to hedge your option position against changes in the stock price. How many shares of stock will you hold for each option contract purchased or sold? (Round your answer to 4 decimal places.) Answer is complete but not entirely correct. Number of shares 0.5753
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- Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price $90 are selling at an implied volatility of 30%. ExxonMobil stock currently is $90 per share, and the risk-free rate is 4%.a. If you believe the true volatility of the stock is 32%, would you want to buy or sell call options?b. Now you need to hedge your option position against changes in the stock price. How many shares of stock will you hold for each option contract purchased or sold?Suppose that call options on ExxonMobil stock with time to expiration 6 months and strike price $87 are selling at an implied volatility of 27%. ExxonMobil stock price is $87 per share, and the risk-free rate is 6%. Required: If you believe the true volatility of the stock is 31%, would you want to buy or sell call options? Now you want to hedge your option position against changes in the stock price. How many shares of stock will you hold for each option contract purchased or sold?Suppose that call options on XYZ stock with time to expiration 3 months and strike price $90 are selling at an implied volatility of 30% ExxonMobil stock price is $90 per share, and the risk free rate is 4%. Required: a1 If you believe the true volatility of the stock is 32%, would you want to buy or sell call options? a2-Now you want to hedge your option position against changes in the stock price. How many shares of stock will you hold for each option contract purchased or sold?
- In an efficient market, a one-year call option on stock S with K = $25 is traded at$7.06, the current stock price S0 = $28.5, the expected market return is 7.5% and the T-Bill yield is 4%. You are about to purchase a one-year put option on the same stock with K = $26, someone offered it to you at a price of $3.6. Should you buy it?If a particular stock does not pay dividends and is currently priced at $24 per share, what should be the price of a call option with a maturity of one year and a strike price of $24.5 if put options with the same features currently cost $2? Assume a risk free rate of 2%. (use 5 decimal places)Please help solve in Excel. Suppose there is a stock that has a current price of $89.50. The risk free rate is 1%. There is an option with a price of $8.67 and a strike price of $85. This option will expire in 4 months. What is the implied volatility of this stock?
- Suppose that the current price of Roblox Corporation common stock is (RBLX) is $100. If the price of RBLX will be either $150 or $50 one year from now, what is the price of a call option with a strike price of $120 expiring one year from now? Assume that the current risk free rate is 1%. What is the risk neutral probability of the stock being $150 one year from now?If a particular stock does not pay dividends and is currently priced at $24 per share, what should be the price of a call option with a maturity of one year and a strike price of $24.5 if put options with the same features currently cost $2? Assume a risk-free rate of 2%. (use 5 decimal places)← You are thinking of buying a stock priced at $109.31 per share. Assume that the risk-free rate is about 4.03% and the market risk premium is 6.48%. If you think the stock will rise to $118.76 per share by the end of the year, at which time it will pay a $3.48 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is (Round to two decimal places.) ...
- Refer to the stock options on Microsoft in the Figure 2.10. Suppose you buy a November expiration call option on 100 shares with the excise price of $140. Required: a-1. If the stock price at option expiration is $144, will you exercise your call?a-2. What is the net profit/loss on your position? (Input the amount as a positive value.)a-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) b-1. Would you exercise the call if you had bought the November call with the exercise price $135?b-2. What is the net profit/loss on your position? (Input the amount as a positive value.)b-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)c-1. What if you had bought the November put with exercise price $140 instead? Would you exercise the put at a stock price of $140?c-2. What is the rate of return on your position? (Negative…You are pricing options with the following characteristics: •Current stock price (St): $35.60 •Exercise price (X): $50 •Time to expiration (T-t): 9 months •Risk-free rate (rf): 3.25% •Volatility (0): 45% (a): What is the Black-Scholes value of call option? In your hand-written solution, provide the calculations of d1,d2, and the final call price. Use Excel or another spreadsheet program to compute the values of N(d1) and N(d2). See the notes for details. (b): Using put-call parity, what is the value of a put option? For this case, assume continuous compounding, which implies that PVt(X)=e-r(T-t).X.Consider a European call on Amazon Stock (AMZN) that expires in one period. The current stock price is $100, the strike price is $120, and the risk-free rate is 5%. Assume AMZN stock will either go up to $140 or down to $80. Construct a replicating portfolio using shares of AMZN stock and a position in a risk-free asset … what is the value of the call option?