options 4 - $13.35 13. Assume that you have a call option...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Old Exam Problems - Options Page 4 of 5 Pages 11. Assume that a stock is currently selling for $50. The stock price could go up by 10% (u = 1.10) or fall by 20% (d = 0.80) each month. The monthly interest rate is 1% (periodic rate). Using the binomial model, calculate the price of a call option on the stock with an exercise price of $40 and a maturity of one month. A. $14.62 B. $11.49 C. $10.40 D. $12.76 E. $13.35 12. Assume that a stock is currently selling for $50. The stock price could go up by 10% (u = 1.10) or fall by 20% (d = 0.80) each month. The monthly interest rate is 1% (periodic rate). Using the binomial model, calculate the price of a call option on the stock with an exercise price of $40 and a maturity of two months. A. $14.62 B. $11.49 C. $10.40 D. $12.76 E.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: $13.35 13. Assume that you have a call option with a strike (exercise) price of $35, a current stock price of $38, 146 days until expiration, and an annualized standard deviation of 48.00%. Assuming a risk-free rate of 4.00 percent, calculate the price of an equivalent put option (same parameters). (Take all preliminary numbers out to 9 decimal places.) A. $1.84 B. $2.20 C. $2.91 D. $1.65 E. $3.27 14. Assume that a stock is currently selling for $80. The stock price could go up by 30% (u = 1.30) or fall by 20% (d = 0.80) each period. The periodic interest rate is 1% (1% each period). Using the binomial model, calculate the price of a call option on the stock with an exercise price of $75 and a maturity of two periods. A. $15.09 B. $13.75 C. $16.48 D. $14.33 E. $15.84...
View Full Document

This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

Ask a homework question - tutors are online