You buy a stock at $300 and buy an at-the-money 9-month European put option on the stock
Question:
You buy a stock at $300 and buy an at-the-money 9-month European put option on the stock at a price of $15.
The continuously compounded risk-free interest rate is 5%.
Calculate your 9-month profit if the 9-month stock price is $280.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 100% (2 reviews)
Here is how to calculate your 9month profit if the 9month stock price is 280 Stock Purchase You boug...View the full answer
Answered By
Fahmin Arakkal
Tutoring and Contributing expert question and answers to teachers and students.
Primarily oversees the Heat and Mass Transfer contents presented on websites and blogs.
Responsible for Creating, Editing, Updating all contents related Chemical Engineering in
latex language
4.40+
8+ Reviews
22+ Question Solved
Related Book For
Question Posted:
Students also viewed these Business questions
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
Last Sale Net Bid Ask Open Int Puts Last Sale Net bid Ask Vol Open Int 16Aug 155.00(1619H155-E) 6.45 0.75 6.95 7.25 9 16Aug 155.00(1619T155-E) 1.18 (0.75) 1.17 1.25 61 4505 16Aug 166.00(1619H160-E)...
-
What does the Black-Sholes-Merton stock option pricing model assume about the probability distribution of the stock price in one year? What does it assume about the continuously compounded rate of...
-
A manufacturer of cases for sound equipment requires that holes be drilled for metal screws. The drill bits wear out and must be replaced; there is expense not only in the cost of the bits but also...
-
The New Recreational Company sells two-year memberships to its recreational facilities. For $2,200 in advance, each member receives the right to 30 nights at the companys campgrounds, 20 rounds on...
-
Earnings per share computations have received increased prominence on the income statement. How would an investor use such information in making investment decisions?
-
Apply the marketing-myopia concept to print media, magazines, and newspapers. What is the implication?
-
Adria Lopez expects second quarter 2014 sales of her new line of computer furniture to be the same as the first quarters sales (reported below) without any changes in strategy. Monthly sales averaged...
-
Briefly describe the two Oracle Administrative Tools and talk about some of their administration usage: -SQL*Plus - Oracle Enterprise Manager Database Express (EM Express) Question2: Explain briefly...
-
The PS index has the following characteristics: One share of the PS index currently sells for 1,000. The PS index does not pay dividends. Sam wants to lock in the ability to buy this index in one...
-
A producer of gold has expenses of 800 per ounce of gold produced. Assume that the cost of all other production-related expenses is negligible and that the producer will be able to sell all gold...
-
Evaluate the integral. | ( 1) sin mx dx
-
The solid steel shaft AB (diameter 19mm) and CD (diameter 25mm) are connected by gears. For each shaft following material properties are valid" G = 77 GPa and Tmax = 55MPa. Both shafts are mounted...
-
14) What is the formula for centripetal force? a) Fc = mg b) Fc = mg c) Fc = Gm1m2/r d) There isn't one. Centripetal force is whatever force is causing a net acceleration to the center of the circle.
-
In which direction does the orange gear wheel rotate when the blue one is rotated in the direction of the arrow? in the same direction as the green one in the same direction as the red one in the...
-
With an elevation of 29,029 ft, Mt. Everest is Earth's tallest mountain. At this altitude, water, which typically boils at 100.0C at sea level, boils at 71.0C. Collect and Organize the following...
-
Bicep produces a maximum force of 6000 N. How much weight in kilograms can a person with a lower arm length of 65 cm lift? Assume the weight of the arm is negligible and the bicep force acts at an...
-
a. A bank account earns 6 percent interest compounded continuously. At what (constant, continuous) rate must a parent deposit money into such an account in order to save $250,000 in 13 years for a...
-
A circular concrete shaft liner with Youngs modulus of 3.4 million psi, Poissons ratio of 0.25, unconfined compressive strength 3,500 psi and tensile strength 350 psi is loaded to the verge of...
-
The depreciation schedule for an asset, with a salvage value of $90 at the end of the recovery period, has been computed by several methods. Identify the depreciation method used for each schedule....
-
The depreciation schedule for a microcomputer has been arrived at by several methods. The estimated salvage value of the equipment at the end of its 6-year useful life is $600. Identify the resulting...
-
TELCO Corp has leased some industrial land near its plant. It is building a small warehouse on the site at a cost of $250,000. The building will be ready for use January 1. The lease will expire 15...
-
Return on Stock Dhofar Return on Stock Sohar Return on Stock State Probability Cement Cement Oman Cement 1 25% 25 20 24 2 15% 21 25 19 3 20% 20 24 24 4 15% 22 22 26 5 Find? 23 26 28 following: Use...
-
Let's revisit the waterline project by now assuming that no resource constraints exist. You intend to start each activity at its early start and finish. Below is your cost estimate for each activity,...
-
Four projects A, B, C and D are under consideration and they each have risks associated with the producing benefits. Based on the information given in the table below, which project is more desirable...
Study smarter with the SolutionInn App