Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price Stock price Interest rate = 6 months = 56% per year = 55 54 Value of a call option = II = 6% Calculate the value of a call option. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "S" sign in your response.)
Q: The Treasury is selling 91 - day T - bills with a face value of $ 10,000 for $ 8,800. If the…
A: Discounted price = 8,800Face value = 10,000duration of treasury bill = 91
Q: The future worth 5 years from now of a present cost of $105,000 to Hydron, Inc., at an interest rate…
A: The future worth signifies the anticipated value of an investment or sum of money at a designated…
Q: Ross mie Lee Ross the amount before adjusting for what our insurance will cover. Ok, so how much is…
A: Variables in the question:No. of patient=More than one. (Exact numbers not mentioned)Deductible=$555…
Q: You are planning to make monthly deposits of $300 into a retirement account that pays 8 percent…
A: Future value is the amount of money worth at a future date. This can be calculated based on the time…
Q: You have credit card debt of $37,500 that has an APR (monthly compounding) of 15%. Each month you…
A: APR of old card = 15%APR of New Card = 12%Number of months in year = 12(i)Monthly Interest rate of…
Q: Fortune Incorporated is preparing its master budget for the first quarter. The company sells a…
A: Working Note#1Computation of sales revenue:Sales revenue=Budgeted units per quarter x Price per…
Q: Suppose your company needs $17 million to build a new assembly line. Your target debt- equity ratio…
A: WAFC = (debt / total assets) * flotation cost of debt + (equity / total assets) * flotation cost of…
Q: Year12345 Free Cash Flow$22 million$26 million $29 million$30 million $32 million General Industries…
A: The concept of time value of money finds application in various fields like bond valuation, stock…
Q: A company bond will mature in two years. The value of company's unlevered equity in two years have…
A: The objective of the question is to calculate the beta of the company's debt. Beta is a measure of…
Q: Keller Cosmetics maintains an operating profit margin of 8.80% and a sales-to-assets ratio of 3.05.…
A: The ROA refers to the measure of the efficiency of the company in utilizing the assets of the…
Q: Assets Cash Accounts receivable Prepaid insurance Inventory Property, plant & equipment Total Assets…
A:
Q: A high-speed electronic assembly machine was purchased two years ago for $50,000. At the present…
A: The objective of the question is to determine when the old assembly machine should be replaced. This…
Q: 700,000,000,000 600,000,000,000 500,000,000,000 400,000,000,000 300,000,000,000 200,000,000,000…
A: In the given question, the growth rate is the average of growth rates between 2012 and 2017. The…
Q: You want to purchase a new car and you are willing to pay $20,000. If you can invest at 10% per year…
A: Future Value refers to the value of the current asset or investment or cash flows at a specified…
Q: Given the following information concerning three stocks, Stock Price Shares Outstanding A $10…
A: We are given the following data -Stock PriceShares OutstandingA$101,000,000 B$143,000,000…
Q: Baruk Industries has no cash and a debt obligation of RM36 milllion that is now due. The market…
A: The objective of the question is to calculate the current share price of Baruk Industries, the…
Q: The Pharoah Department of Transportation has issued 25-year bonds that make semiannual coupon…
A: Face value = $1,000Coupon rate = 10.425%Years to maturity= 25 x 2=50YTM = 10.30%/2=5.15%
Q: A bank account pays 3% interest with monthly com- pounding. A series of deposits started with a…
A: Effective Rate- Any rate that is compounded annually is called an effective rate.Nominal rate- Any…
Q: Consider the two (excess return) index-model regression results for stocks A and B. The risk-free…
A: Treynor measure = (RP-RF) / BETA.
Q: Road Kill Restaurant had the following account balances. The change in these accounts represents a…
A: Decrease in current assets assets is inflow of cash and increase in current liabilties is also…
Q: Use an excel spreedsheet to answer this question: The National Potato Cooperative purchased a…
A: Equivalent Annual Revenues (EAR) is a financial concept used to simplify complex financial…
Q: Jen owns 7,500 of the 480,000 shares of TC Inc. The company has just announced a rights offering…
A: In this question we need to compute the percentage of the firm will Jen own after the rights…
Q: The GiN Corp. is expected to pay a dividend of $3 which is expected to grow at 2% for a foreseeable…
A: The objective of the question is to calculate the weighted average cost of capital (WACC) for GiN…
Q: Suppose that you have a $20,000 unsubsidized student loan that is currently deferred. You plan to…
A: Amortization of loan refers to the systematic and periodic repayment of a loan. This repayment…
Q: QUESTION THREE (b) During the past five years, you had investments in companies listed on the GSE.…
A: The objective of the question is to calculate and compare the performance of two stocks X and Y…
Q: What is forecasting risk? In general, would the degree of forecasting risk be greater for a new…
A: Forecasting risk is also known as the estimation risk. It refers to the risk of incorrect decision…
Q: omack Company's bonds have a 9-year maturity, a 11% coupon, paid semiannually, and a par value of…
A: Current price of bond is the price which can be paid for purchase of the bond. It is also called…
Q: Mastery Problem: Time Value of Money Time value of money Due to both interest earnings and the fact…
A: Total amount = Principal + Principal *rate * time.
Q: Teens an a. Use a two-way data table to show the impact of down payment amounts ranging from $1,000…
A: The amortization refers to the systematic repayment of loan and interest amount. Repayment is an…
Q: Suppose you purchase a 30-year Treasury bond with a 5% annual coupon, initially trading at par. In…
A: Computation of IRR of bond if sold at year-10, and if hold till maturity, shown in below sheet:Face…
Q: 15. Standard deviation can be used to measure a) Risk of an investment, b) Return of an investment,…
A: The correct answer is: a) Risk of an investment.
Q: Suppose you bought a GM corporate bond on January 25, 2001 for $750 and solid it on January 25, 2004…
A: Holding period return (HPR):Holding period return refers to the total return earned by an investor…
Q: Consider the following information regarding the performance of a money manager in a recent month.…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: NPV of Pigpen's project?
A: Cost = $ 13,80,000 Depreciation for each of the 10 years would be $1,38,000 ($13,80,000/10) using…
Q: The XYZ Co. last paid a dividend of $2.50/per share. The company is expected to increase the…
A: Stock worth refers to the price at which the shares can be bought or sold in the financial market…
Q: (C) each. You have $10.000 to invest. You invest all the $10,000 in call options on Alphabet Inc.…
A: Current Stock price of Alphabet Inc. = 1000Cal Option having Exercise [rce $1000 is selling for…
Q: Date Jan. 1, 2005 Feb. 1, 2005 Mar. 1, 2005 Apr. 1, 2005 Jan. 1, 2006 Stock Price (after Event) $100…
A: The annual return, often referred to as the annualized return, is a measure used in finance to…
Q: You are given the following information concerning Company A with 13% tax rate. Its common stock is…
A: The weighted average cost of capital is the combined cost of capital from all sources such as debt,…
Q: Directions: Review the following scenario and answer the question that follows: Scenario: Date of…
A: Shared Appreciation Due (SAD) is a financial arrangement between borrowers and lenders, commonly…
Q: You have just won a two-part lottery! The first part will pay you $50,000 at the end of each of the…
A: The present value is the value of a future sum of money today. Present value is based on the concept…
Q: State the equivalent simple interest rate for a 15% bank discount on a 55 day loan.
A: The calculation of simple interest involves calculating the amount of the principal.The rate is…
Q: Stevenson's Bakery is an all-equity firm that has projected perpetual EBIT of $204,000 per year. The…
A: We are given the following data -EBIT$204,000Cost of equity14.5%Tax rate39%Cost of borrowing…
Q: Suppose that Cloudastries Bank is a U.S.-based financial intermediary that serves the foreign…
A: Exchange rates represent the relative value of one currency compared to another in the global…
Q: Question 4 Assume that you are analysing a capital budgeting project. The initial investment for…
A: Net Present Value (NPV) refers to present value or the discounted value of all future cash flows…
Q: At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns…
A: Future value = Present value x (1+i)^twherei = interest rate per periodt = total period
Q: 14) The subject is a Class A office building. Sale 1 is also a Class A building that sold for $100…
A: 1. Price Adjustment Due to Market Increase: Both Sale 1 and Sale 2 need to be adjusted for the 10%…
Q: KADS, Incorporated has spent $450,000 on research to develop a new computer game. The firm is…
A: Asset cost $305,000Less: Depreciation charged ($171,625)WDV of machine at the time of sale…
Q: The primary objective of an equity - income fund is Question 19 options: capital gains. potentially…
A: The objective of an equity income fund is generally to seek long-term capital appreciation and/or…
Q: Maureen purchased a laddered portfolio of par-value bonds with semiannual coupons for $20,918. The…
A: To find the face amount X of each bond, we need to consider the different components of Maureen's…
Q: Claim against assets are represented by__.I am not satisfy give downvote A. saved earning B.…
A: Claims against assets represent the various commitments and interests that stakeholders hold in a…
Step by step
Solved in 3 steps with 3 images
- Use the Black-Scholes formula to find the value of a call option based on the following inputs. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Stock price Exercise price Interest rate Dividend yield Time to expiration Standard deviation of stock's returns Call value $ 51 $ 64 0.068 0.04 0.50 0.265Use the Black-Scholes formula to find the value of a call option based on the following inputs. (Round your final answer to 2 decimal places. Do not round intermediate calculations.) Stock price Exercise price Interest rate Dividend yield Time to expiration Standard deviation of stock's returns Call value GA $ $ $ 48 60 0.07 0.04 0.50 0.26Consider shorting a call option c on a stock S where S = 24 is the value of the stock, K = 30 is the strike price, T = ½ is the expiration date, r = 0.04 is the continuously compounded interest rate per year, and = 0.3 is the volatility of the price of the stock. Determine the delta ratio Δ .
- Excel Online Structured Activity: Black-Scholes Model Assume the following inputs for a call option: (1) current stock price is $29, (2) strike price is $36, (3) time to expiration is 5 months, (4) annualized risk-free rate is 4%, and (5) variance of stock return is 0.31. Use the Black-Scholes model to find the price for the call option. Do not round intermediate calculations. Round your answer to the nearest cent.Forward prices of the form Fo = S,e"" are sometimes referred to as “risk-adjusted expected future spot prices". If a stock's expected annualized log return is a (i.e. E[Sr] Soear, or – In ("5") = a), show that the expected annualized log return over the period So t = 0 → T (i.e. the rate of appreciation in F) on a forward contract with maturity T years written on that stock must be equal to the risk premium a – r, where r is the annualized risk-free rate. Explain the surprising result that an asset that requires zero initialConsider two put options on different stocks. The table below reports the relevant information for both options: Put optionTime to maturityCurrent price of underlying stockStrike priceVolatility ( )X1 year$27$1830%Y1 year$25$2030%All else equal, which put option has a lower premium? A.Put option Y B.Put option X
- What are the prices of a call option and a put option with the following characteristics? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Stock price=$79Exercise price=$75Risk-free rate=3.50% per year, compounded continuouslyMaturity=5 monthsStandard deviation=58% per yearSuppose you are attempting to value a 1-year expiration option on a stock with volatility (i.e., annualized standard deviation) of σ = 0.34. What would be the appropriate values for u and d if your binomial model is set up using: a. 1 period of 1 year. b. 4 subperiods, each 3 months. c. 12 subperiods, each 1 month. Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Subperiods At = T/n u = exp(σ√ At) d = exp(-σ√ At) a. 1 1/1 = 1 b. 4 1/4 = 0.25 C. 12 1/12 0.0833You are evaluating a put option based on the following information: P = Ke-H•N(-d,) – S-N(-d,) Stock price, So Exercise price, k = RM 11 = RM 10 = 0.10 Maturity, T= 90 days = 0.25 Standard deviation, o = 0.5 Interest rate, r Calculate the fair value of the put based on Black-Scholes pricing model. Cumulative normal distribution table is provided at the back.
- 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.Which of the following positions in options benefit if the underlying stock price increases? Assume the options have several months remaining until the exercise date. a. Short position in call and long position in put b. Short position in both call and put c. Long position in a put d. Long position in call and short position in put e. Short position in a call f. Short position in a put g. Long position in a callSuppose that a call option with a strike price of $48 expires in one year and has a current market price of $5.17. The market price of the underlying stock is $46.25, and the risk-free rate is 1%. Use put-call parity to calculate the price of a put option on the same underlying stock with a strike of $48 and an expiration of one year. The price of a put option on the same underlying stock with a strike of $48 and an expiration of one year is $. (Round to the nearest cent.)