# Question: QBV a non dividend paying stock is currently trading for 80 a

QBV, a non-dividend-paying stock, is currently trading for $80 a share. There is a 25-percent chance that the stock will trade for $65 in one year, and a 75-percent chance that the price will increase to $105. The risk-free rate is 5 percent per year. All options expire in one year.

a. A call option has a strike price of 100. Determine the hedge ratio.

b. Use the binomial option pricing formula to determine the value of a call with a strike price of $100.

c. Use the put-call parity to determine the value of a put with a strike price of $100.

a. A call option has a strike price of 100. Determine the hedge ratio.

b. Use the binomial option pricing formula to determine the value of a call with a strike price of $100.

c. Use the put-call parity to determine the value of a put with a strike price of $100.

## Answer to relevant Questions

QBV, a non-dividend-paying stock, is currently trading for $100 a share. There is a 25-percent chance that the stock will trade for $85 in one year, and a 75-percent chance that the price will increase to $135. The risk-free ...The current price of a stock is $97. You expect the price of the stock to be in the range of $95 to $105 in the next period. The call option with an exercise price of $105 is $1.30; the put option with an exercise price of ...a. IF the firm is not capital constrained and the projects in Table are independent, which projects should the firm undertake using the following criteria?i. NPVii. IRRiii. Payback periodiv. Discounted payback periodb. Are ...Cutler Compacts will generate cash flows of $30,000 in year 1, and $65,000 in year 2. However, if it makes an immediate investment of $20,000, it can instead expect to have cash streams of $55,000 in total in year 1 and ...Longlife Company is considering an investment in Ponce Leon Mineral Baths. The investment has the same risk characteristics as the firm. It is assumed that all cash flows are perpetuities and that there are no taxes. ...Post your question