midterm2_fall10

midterm2_fall10 - Exam 2(FINA 4320/6320 In class(60 min I...

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Unformatted text preview: Exam 2 (FINA 4320/6320) In class (60 min) I. Multiple Choice Questions: (14 points) 1. Buy 100 shares of stock and buy one August 165 put contract. Hold the position until expiration. Stock price is 165.5 and put price is 4.5. Determine the breakeven stock price, maximum and minimum profits. A. 165.5, ∞, ∞, -450 B. 165.5, 450 , , -450 C. 170, ∞ , -500 D. 170, 500, -∞ 500, -∞ 2. On day of July 6, Oct 160 call price is $8.13 , Stock price is 165.13, exercise price is 165, continuously compounded risk free rate is 0.0571, σ = 0.21 . Suppose the stock pays a $1.1 dividend with an ex-dividend date of September 10. What’s the theoretical fair value of the call? B. 7.25 B. 8.01 C. 9.37 D. 9.15 3. Short answer questions: (86 points) 1. Call price is $13.8 and put price is $7.2 for stock options where the exercise price is $100, the risk-free interest rate is 5% (continuously compounded), and the time to expiration is 1 year....
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midterm2_fall10 - Exam 2(FINA 4320/6320 In class(60 min I...

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