Copy of FCF 9th edition Chapter 24

Copy of FCF 9th edition Chapter 24 - Chapter 24 Problems...

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Chapter 24 Problems 1-22 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-in" be installed in Excel. To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak" and "Solver Add-In."
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Chapter 24 Question 1 Input Area: T-bills 5.6% Share price $66 Price won't drop below $60 a. Exercise price on a call $55 b. Exercise price on a call $45 c. Exercise price on a put $55 Output Area: a. Call value $13.92 Intrinsic value $11.00 b. Call value $23.39 Intrinsic value $21.00 c. Put value $- There is no possiblity that the put will finish in the money. Intrinsic value = $0.
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Chapter 24 Question 2 Input Area: Calls Puts Option Strike Price Expiration Volume Last Volume Last RWJ 85 80 Mar 230 2.80 160 0.80 85 80 Apr 170 6.00 127 1.40 85 80 Jul 139 8.05 43 3.90 85 80 Oct 60 10.20 11 3.65 Output Area: a. The calls are in the money. The intinsic value is $5.00 b. The puts are out of the money. The intrinsic value is $0.00 c. The Mar call and the Oct put are mispriced. The call is mispriced because it is selling for less than its intrinsic value. If the option expired today, the arbitrage would be to buy the call for $2.80, exercise it and pay $80 for a share of stock, and sell the stock for $85. Riskless profit of $2.20. The Oct put is mispriced because it sells for less than the July put. To take advantage of this, sell the July put for $3.90 and buy the October put for $3.65, for a cash inflow of $0.25. The The exposure of the short position is completely covered by the long position in the October put, with a positive cash inflow today.
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Chapter 24 Question 3 Input Area: Calls Puts Option Strike Price Expiration Volume Last Volume Last Macrosoft 119 120 Feb 85 3.23 40 3.70 119 120 Mar 61 4.41 22 5.30 119 120 May 22 6.97 11 7.30 119 120 Aug 3 10.20 3 9.10 a. Contracts bought 10 Feb call $120 b. Share price $134 Share price $126 c. Contracts bought 10 Share price $109 d. Contracts sold 10 Share price $108 Share price $132 Output Area: a. Price $3,230.00 b. $14,000 $6,000 c. Initial cost $9,100 Maximum gain $110,900 Terminal value $11,000 Net gain $1,900 d. Option payoff $(12.00) Net profit $(2,900) Option payoff $- Net profit $9,100 Break-even $110.90 For terminal stock prices above $110.90 , the writer of the put option makes a net profit. S T S T
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Chapter 24 Question 4 Input Area: Low stock price $62 High stock price $86 T-bills 5% a. Current price $70 Exercise price $65 b. Exercise price $75 Output Area: a. $8.10 b. $5.02 C 0 C 0
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Chapter 24 Question 5 Input Area: Low stock price $75 High stock price $95 T-bills 6% a. Current price $85 Exercise price $65 b. Exercise price $70 Output Area: a. $23.68 b. $17.81 C 0 C 0
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Chapter 24 Question 6 Input Area: Call option price $1,300 Stock price $48 Stock price $67 Exercise price $60 Risk-free rate 8% Output Area: $13.00 $79.73 C 0 S 0
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Chapter 24 Question 7
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This note was uploaded on 02/12/2012 for the course BT 1003 taught by Professor As during the Spring '11 term at American Jewish University.

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Copy of FCF 9th edition Chapter 24 - Chapter 24 Problems...

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