It is March 12. Apple Inc.'s (AAPL) stock is currently trading at US$121.03 per share and...
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It is March 12. Apple Inc.'s (AAPL) stock is currently trading at US$121.03 per share and has a volatility of 40%. The current risk-free rate of interest is 5% per annum. When solving the following problems, show each step. a. What is the price of a European CALL option written on this stock with a $150 strike price that expires in 35 days? Price the option using the Black-Scholes model.? b. What is the price of a European PUT option written on this stock with a $150 strike price that expires in 35 days? Price the option with the Black-Scholes model. c. Based on your answers to (a) and (b), verify the put-call parity holds. d. What is the price of a European CALL option written on this stock with a $150 strike price that expires in 35 days? Price the option with a two-step binomial tree model. Would your answer change if it were an American CALL option? Show your work. e. What is the price of a European PUT option written on this stock with a $150 strike price that expires in 4 weeks? Price the PUT option with a two-step binomial tree model. Would your answer change if it were an American PUT option? Show your work. f. Using Sun, Sud, fun, fud, So and f from 4.d., calculate the delta, A of the PUT option. It is March 12. Apple Inc.'s (AAPL) stock is currently trading at US$121.03 per share and has a volatility of 40%. The current risk-free rate of interest is 5% per annum. When solving the following problems, show each step. a. What is the price of a European CALL option written on this stock with a $150 strike price that expires in 35 days? Price the option using the Black-Scholes model.? b. What is the price of a European PUT option written on this stock with a $150 strike price that expires in 35 days? Price the option with the Black-Scholes model. c. Based on your answers to (a) and (b), verify the put-call parity holds. d. What is the price of a European CALL option written on this stock with a $150 strike price that expires in 35 days? Price the option with a two-step binomial tree model. Would your answer change if it were an American CALL option? Show your work. e. What is the price of a European PUT option written on this stock with a $150 strike price that expires in 4 weeks? Price the PUT option with a two-step binomial tree model. Would your answer change if it were an American PUT option? Show your work. f. Using Sun, Sud, fun, fud, So and f from 4.d., calculate the delta, A of the PUT option.
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a To calculate the price of a European CALL option using the BlackScholes model we can use the following formula C S Nd1 X er T Nd2 Where C is the price of the option S is the current stock price 1210... View the full answer
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Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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