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optionsHW

# optionsHW - return if you bought the stock initially rather...

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1 Homework 1. Owning a single share of stock pays dividends of \$1 in 3 months and 6 months. If the current stock value is 56 and the continuous interest rate is 7 . 5%, find the price of a 1 year forward contract. 2. Find the price of a 4-year prepaid forward contract if a stock’s current price is 70, the continuous interest rate is 8%, and the continuous interest rate is 5%. 3. The current stock price is \$200. You expect the stock to decrease in price and purchase a 3-month 180-strike put option for 3 . 34. What is your annual rate of return if the stock price in 3 months is \$100, \$150, or \$200. Find the corresponding annual rates of
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Unformatted text preview: return if you bought the stock initially rather than purchasing a put option. 4. A 30-strike 2 year call option costs \$2 . 98 and a 30-strike 2 year put option costs 5 . 51. If the current stock price is 35 and the continuous interest rate is 3%, ﬁnd the dividend rate. 5. A 55-strike 3 year call option costs \$6 . 39 and a 75-strike 3 year put option costs 4 . 68. You purchase both a call and a put option by borrowing money. Find your proﬁt in 3 years if the stock price is 40, 65, and 80....
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