Options Solutions 8

Options Solutions 8 - A. $14.62 B. $11.49 * C. $10.40 D....

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Old Exam Problems - Options - Solutions Page 8 of 13 Pages Call Price = $22.90 - $19.83 = $3.07 Put = Call + Ee -r*t - S Put Price = $3.07 + 29.76 - $32.00 = $0.83 Checked Using the Excel Model : Stock Price = $32.00 Exercise Price = $30.00 PV (Exercise) = $29.76 d1 = 0.5728 N(d1) = 0.7166 d2 = 0.4278 N(d2) = 0.6656 Call Price = $3.12 Put = Call + Ee -r*t - S = $3.12 + $29.76 - $32.00 = $0.88 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.
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Unformatted text preview: A. $14.62 B. $11.49 * C. $10.40 D. $12.76 E. $13.35 u = 1.10; d = .80; P = (1.01 - .80)/(1.10 - .80) = .70; (1-P) = 1 - .70 = .30 P = $50 P 1 = ($50)(1.10) = $55.00 ($50)(0.80) = $40.00 C u = $55.00 - $40.00 = $15.00 C d = $40.00 - $40.00 = $ 0.00 C = [(.70)($15.00) + (.30)($0.00)]/[1.01] = $10.40 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....
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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.

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