The stock price of Heavy Metal (HM) changes only once a month: either it goes up...
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The stock price of Heavy Metal (HM) changes only once a month: either it goes up by 24% or it falls by 20.7%. Its price now is $48. The interest rate is 1.2% per month. a. What is the value of a one-month call option with an exercise price of $48? b. What is the option delta? c. The payoffs of the call option can be replicated by buying shares of stock and borrowing. What amount should be invested in stock and what amount must be borrowed? d. What is the value of a two-month call option with an exercise price of $49? e. What is the option delta of the two-month call over the first one-month period? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A and B Req C Req D and E a. What is the value of a one-month call option with an exercise price of $48? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the option delta? (Do not round intermediate calculations. Round your answer to 3 decimal places.) a. b. Value of call Delta $ 5.61 0.537 The stock price of Heavy Metal (HM) changes only once a month: either it goes up by 24% or it falls by 20.7%. Its price now is $48. The interest rate is 1.2% per month. a. What is the value of a one-month call option with an exercise price of $48? b. What is the option delta? c. The payoffs of the call option can be replicated by buying shares of stock and borrowing. What amount should be invested in stock and what amount must be borrowed? d. What is the value of a two-month call option with an exercise price of $49? e. What is the option delta of the two-month call over the first one-month period? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A and B Req C Req D and E a. What is the value of a one-month call option with an exercise price of $48? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the option delta? (Do not round intermediate calculations. Round your answer to 3 decimal places.) a. b. Value of call Delta $ 5.61 0.537
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