MA373 F15 Homework Chapter 3 DM

MA373 F15 Homework Chapter 3 DM - Derivative Markets...

Info icon This preview shows pages 1–2. Sign up to view the full content.

Derivative Markets Chapter 3 Homework November 24, 2015 Use the following information to complete the problems 1-11. The current spot price of PAC stock is 60. PAC stock does not pay a dividend. The current annual effective risk free interest rate is 4.04%. For forward price for a 6 month forward contract on PAC stock is 61.20. You have the following premiums for European style calls or European style puts which expire in 6 months: Strike Price Call Premium Put Premium 57 6.46 2.37 60 4.80 3.64 63 3.46 5.25 1. Create a payoff-profit table for a Cap on PAC stock. Assume that any option is purchased with a strike price equal to the current spot price of the underlying asset. 2. Create a payoff-profit table for Floor on PAC stock. Assume that any option is purchased with a strike price equal to the current spot price of the underlying asset. 3. Create a payoff-profit table for a 6 month synthetic forward on PAC stock using options with a strike price of 63. 4. Create a payoff-profit table for a 6 month Bull Spread on PAC stock using a 60 strike call and a 63 strike call. 5. The premium for a 6 month European style call on PAC stock is 1.46 if the strike price is 70. Determine the premium for a 6 month European style put on PAC stock if the strike price is 70. 6. The premium for a 6 month European style put on PAC stock is 1.70 if the strike price is 55. Determine the premium for a 6 month European style call on PAC stock if the strike price is 55. 7. Create a payoff-profit table for a 6 month Bull Spread on PAC stock using a 57 strike put and a 63 strike put.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern