1. (1 point) Assume all rates are per annum continuously compounded Pzer stock (PFE) is trading at \$17.10 today. Consider a Eu- ropean call option on...
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Question src="/qa/attachment/10699091/" alt="Screen Shot 2019-10-01 at 7.14.09 PM.png" /> I just need the answer, no explain. also no need to do Question 5 Attachment 1 Attachment 2 Attachment 3 Attachment 4 ATTACHMENT PREVIEW Download attachment Screen Shot 2019-10-01 at 7.13.55 PM.png 1. (1 point) Assume all rates are per annum continuously compounded Pﬁzer stock (PFE) is trading at \$17.10 today. Consider a Eu- ropean call option on 1 share of PFE with strike price \$17.30 expiring in 13 months. The call is selling today for \$0.48. The risk-free rate is 4.6 (a) You buy one of these calls. In 13 months at expiration, PFE is trading at \$15.85. What is the cal] worth at expiration? (b) What is your proﬁt? (Note: a loss of X corresponds to a proﬁt of —X). (c) Suppose PFE is trading at expiration for \$15.30 but you exercise the call anyway. What is your proﬁt? (d) Now instead suppose that PFE is trading at \$19.30 at expi- ration and you had written one of the calls. What is your proﬁt? Answerf s) submitted: \$0 -\$0.50 -\$2 .50 -\$l.52 (score 0.75) 2. (1 point) Consider the following three European call options, all expir- ing in one year. Option A has strike \$11.00; Option B has strike \$15.00; Option C has strike \$19.00. (a) Create a bull spread from options A and B, and graph its payout as a function of ST. List the (x,y) coordinates of the points where the payoﬁ function is not linear. Note: Your answer should be in the form of a coordinate pair , e.g. (123.45, 678.90). Do not include dollar symbols (\$) in your solution. (b) Create a bear spread from options B and C, and graphs its payoff as a function of ST. List the (icy) coordinates of the points where the payoff function is not linear. Note: Your answer should be in the form of a coordinate pair , e.g. (123.45, 678.90). Do not include dollar symbols (\$) in your solution. (c) Create a butterfly spread from options A, B and C, and graphs its payoff as a function of ST. List the (x,y) coordinates of the points where the payoff function is not linear. Note: Your answer should be in the form ofa coordinate pair , eg. (123.45, 678.90). Do not include dollar symbols (\$) in your solution. Answerf s) submitted: (incorrect) 3. (1 point) Assume all rates are per annum continuously compounded Consider the following three European call options, all ex- piring in one year. Option A has strike \$20.00 and premium \$7.00; Option B has strike \$27.00 and premium \$4.00; Option C has strike \$34.00 and premium \$2.00. Suppose the price on the stock today is \$27.00. (a) Which call(s) is(are) in-the—money? c A. OptionA o B. Option B o C. Option C c D. None of the above (b) Which call(s) is(are) out-of-the-money‘? o A. Option A o B. Option B o C. Option C o D. None of the above (C) Suppose the risk-free rate is 3.5 Amwerfs) submitted: IA DC I (incorrect) Assume all rates are per annum continuously compounded. Assume no arbitrage. A ﬁnancial derivative is guaranteed to be worth \$150.00 in 23 months. Assume the risk-free rate is 5.2 (a) What is the derivative worth today? ATTACHMENT PREVIEW Download attachment Screen Shot 2019-10-01 at 7.14.09 PM.png 2. (1 point) Consider the following three European call options, all expir- ing in one year. Option A has strike \$11.00; Option B has strike \$15.00; Option C has strike \$19.00. (a) Create a bull spread from options A and B, and graph its payout as a function of ST. List the (x,y) coordinates of the points where the payoff function is not linear. Note: Your answer should be in the form of a coordinate pair , e.g. (123.45, 678.90). Do not include dollar symbols (\$) in your solution. (b) Create a bear spread from options B and C, and graphs its payoff as a function of ST. List the (x,y) coordinates of the points where the payoff function is not linear. Note: Your answer should be in thefonn of a coordinate pair , eg. (123.45, 678.90). Do not include dollar symbols (.5?) in your solution. (c) Create a butterﬂy spread from options A, B and C, and graphs its payoff as a function of 87. List the (icy) coordinates of the points where the payoff function is not linear. (b) Describe an arbitrage opportunity if the derivative is trad- ing at \$121.00 today. This should only involve one of the deriva- tives. What is your guaranteed proﬁt in 23 months from the arbitrage? Generated by ©WeBWorK. mlMebwuskmanmg. Mathematical Association orfAIrerlcu o A. Option A o B. Option B o C. Option C o D. None of the above (c) Suppose the risk-free rate is 3.5 Answen’s) submitted: 0A 0C 0 (incorrect) Assume all rates are per annum continuously compounded. Assume no arbitrage. A ﬁnancial derivative is guaranteed to be worth \$150.00 in 23 months. Assume the risk-free rate is 5.2 (a) What is the derivative worth today? Amwen’s) submitted: a \$135. 77 (score 0.5) ATTACHMENT PREVIEW Download attachment Screen Shot 2019-10-01 at 7.15.05 PM.png 5. (1 point) Assume all rates are per annum continuously compounded. Assume no arbitrage. The spot price of an asset is \$28.00 and the risk-free rate is 5.1 (a) What is the least (known) upper bound on the premium of call option B? (b) What is the least upper bound on the premium of the cor- responding European put option with strike \$27.00 expiring in 21 months? 11an s) submitted: (incorrect) 6. (1 point) Assume all rates are per annum continuously compounded. Assume no arbitrage. Consider a European call option on an asset with spot price \$170.00, strike \$180.00. and premium \$111.00, expiring in 2] months. Assume the risk-free rate is 5.2 (a) What is the price of the corresponding put? (b) Graph the payoff function for the straddle using the call and the put. What are the coordinates of the minimum of the payoff function? Note: Your answer should be in the form of a coordinate pair , eg. (123.45, 678.90). Do not include dollar symbols (\$) in your solution. (c) Graph the proﬁt function for the straddle using the call and the put. What are the coordinates of the minimum of the proﬁt function? Note: Your answer should be in the form of a coordinate pair , e.g. (123.45, 678.90). Do not include dollar symbols (.5?) in your solution. Answer( s ) submitted (incorrect) Assume all rates are per annum continuously compounded Consider a European put option on Google with strike price \$322.00 expiring in 21 months. Suppose that the spot price of Google is \$344.00 and the risk-free rate is 4.8 (a) From the known information, is there an arbitrage oppor- tunity? o A. Yes 9 B. No (b) Suppose the stock pays a dividend. Find the range of (the present value of) the dividend for which there is an arbitrage op- portunity. If one of the bounds is inﬁnity, simply type ”inﬁnity” Note: Your answer should be in the form of a coordinate pair , e.g. (123.45, 678.90). Do not include dollar symbols (3;) in your solution. (c) Would an arbitreur go long or short the put? 0 A. Long 0 B. Short Amwetf s ) submitted: (incorrect) 8. (1 point) Assume all rates are continuous and per annum. Suppose that the current price of an asset is \$22.20. The risk- free rate is 3.2 What is the risk-free proﬁt (in today’s dollars) of a trade in- volving one call and one put? Answeﬂs) submitted: (incorrect) 9. (1 point) Assume there is no arbitrage, and that all rates are continu- ous and per annum. Consider a European call option on [BM with strike price \$26.05 and expiration in 18 months. Suppose IBM is trading at \$26.35. The risk-free rate is 6.2 (a) What is the range of values for the option? Enter your solution as a coordinate pair accurate to two dec- imal places, e.g. (123.45, 678.90). Do not include dollar sym- bols (\$) in your solution. ATTACHMENT PREVIEW Download attachment Screen Shot 2019-10-01 at 7.15.12 PM.png 6. (1 point) Assume all rates are per annum continuously compounded. Assume no arbitrage. Consider a European call option on an asset with spot price \$170.00, strike \$180.00, and premium \$111.00, expiring in 21 months. Assume the risk-free rate is 5.2 (a) What is the price of the corresponding put? (b) Graph the payoff function for the straddle using the call and the put. What are the coordinates of the minimum of the payoff function? Note: Your answer should be in the form of a coordinate pair , e.g. (123.45, 678.90). Do not include dollar symbols (.5?) in your solution. (0) Graph the proﬁt function for the straddle using the call and the put. What are the coordinates of the minimum of the proﬁt function? Note: Your answer should be in the form of a coordinate pair , e.g. (123.45, 678.90). Do not include dollar symbols (.5?) in your solution. Answerf s ) submitted: (incorrect) U H . Lung, o B. Short Answerf s) submitted: (incorrect) 8. (1 point) Assume all rates are continuous and per annum. Suppose that the current price of an asset is \$22.20. The risk- free rate is 3.2 What is the risk—free proﬁt (in today‘s dollars) of a trade in- volving one call and one put? Amweﬂ s ) submitted: (incorrect) 9. (1 point) Assume there is no arbitrage, and that all rates are continu- ous and per annum. Consider a European call option on [BM with strike price \$26.05 and expiration in 13 months. Suppose IBM is trading at \$26.35. The risk-free rate is 6.2 (a) What is the range of values for the option? Enter your solution as a coordinate pair accurate to two dec- imal places, e.g. (123.45, 678.90). Do not include dollar sym- bols (\$) in your solution. (b) Suppose this call option is trading on the Philadelphia Stock Exchange for \$5.29. What is the price of the European put option with the same strike and expiration? Answetf s ) submitted: (incorrect)

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