A call option has an exercise price of $70 and matures in six months. The current stock
Question:
A call option has an exercise price of $70 and matures in six months. The current stock price is $73, and the riskfree rate is 5 percent per year, compounded continuously. What is the price of the call if the standard deviation of the stock is 0 percent per year?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 58% (12 reviews)
If the standard deviation ...View the full answer
Answered By
Ali Khawaja
my expertise are as follows: financial accounting : - journal entries - financial statements including balance sheet, profit & loss account, cash flow statement & statement of changes in equity -consolidated statement of financial position. -ratio analysis -depreciation methods -accounting concepts -understanding and application of all international financial reporting standards (ifrs) -international accounting standards (ias) -etc business analysis : -business strategy -strategic choices -business processes -e-business -e-marketing -project management -finance -hrm financial management : -project appraisal -capital budgeting -net present value (npv) -internal rate of return (irr) -net present value(npv) -payback period -strategic position -strategic choices -information technology -project management -finance -human resource management auditing: -internal audit -external audit -substantive procedures -analytic procedures -designing and assessment of internal controls -developing the flow charts & data flow diagrams -audit reports -engagement letter -materiality economics: -micro -macro -game theory -econometric -mathematical application in economics -empirical macroeconomics -international trade -international political economy -monetary theory and policy -public economics ,business law, and all regarding commerce
4.00+
1+ Reviews
10+ Question Solved
Related Book For
Corporate Finance
ISBN: 978-1259918940
12th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
Question Posted:
Students also viewed these Business questions
-
Pintails stock price is currently $200. A one-year American call option has an exercise price of $50 and is priced at $75. How would you take advantage of this great opportunity? Now suppose the...
-
Tony Smith believes that the price of a particular underlying, currently selling at $93, will increase substantially in the next six months, so he purchases a European call option expiring in six...
-
Problem 21 considered an arbitrage opportunity involving an American option. Suppose that this option was a European call. Show that there is a similar possible arbitrage profit. Problem 21 Pintails...
-
5 Question 42 (2.5 points) Consider a put option that gives the long position the right to sell the underlying asset for $12.34 in 5.67 years. The continuously compounded risk free rate of interest...
-
Chemical tests of four metals A, B, C, and D show the following results. (a) Only B and C react with 0.5 M HCl to give H2 gas.
-
A 100-g bullet (c = 0.030 cal/g C) is initially at 20 C. It is fired straight upward with a speed of 420 m/s, and on returning to the starting point strikes a cake of ice at exactly 0 C. How much...
-
Go to the St. Louis Federal Reserve FRED database, and find data on real GDP (GDPC1), potential GDP (GDPPOT), and the unemployment rate (UNRATE) from 1960 to the most recent period. For the...
-
McEntire Corporation began operations on January 1, 2009. During its first 3 years of operations, McEntire reported net income and declared dividends as follows. The following information relates to...
-
When two electric charges are held a distance r apart, the electrostatic force between them is FE. The distance between the charges is then changed to 1r. (Enter numerical value only) The new...
-
An insulated vertical pistoncylinder device initially contains 0.2 m3 of air at 200 kPa and 22°C. At this state, a linear spring touches the piston but exerts no force on it. The cylinder is...
-
A stock is currently priced at $77. The stock will either increase or decrease by 16 percent over the next year. There is a call option on the stock with a strike price of $75 and one year until...
-
Sunburn Sunscreen has a zero coupon bond issue outstanding with a $10,000 face value that matures in one year. The current market value of the firms assets is $11,200. The standard deviation of the...
-
Find the value of ( g) at the given value of x. f(u) 2 = (a + 1). u = n g(x) = X - 1, x = -1
-
Determine the direction of the resultant force FR (in degrees) measured counterclockwise from the positive x-axis. Consider 0 = 40 degrees and F2 = 400 N. Hint: Find the resultant force in Cartesian...
-
As shown in the figure, water in the tank is forced to flow through a nozzle with a diameter of 2 cm by means of a piston with a diameter of 6 cm moving at a speed of 5 m/sec. Find the force required...
-
The skin friction coefficient of a laminar boundary layer developing over a flat plate is measured as 0.00347, a certain distance downstream of the leading edge of the plate. The working fluid is air...
-
A horizontal cantilever beam (length 3L) is fixed at the wall at the left end and vertically constrained at the right end. There is a hinge located at x = L and a point load, P, at x = 2L acting...
-
2. a) A heat pump designed to deliver heat at 55C absorbs heat from low temperature environment at 5*C. CoP of the heat pump is 5. Calculate CoP of an equivalent Carnot heat pump and discuss how the...
-
William is employed by an accounting firm and uses his automobile in connection with his work. During the month of October 2015, he works at the office for 3 days and participates in the audit of a...
-
Write each fraction as a percent. 7 50
-
Klingon Cruisers, Inc., purchased new cloaking machinery three years ago for $7 million. The machinery can be sold to the Romulans today for $5.3 million. Klingons current balance sheet shows net...
-
The Alexander Co. had $328,500 in taxable income. Using the rates from Table 2.3 in the chapter, calculate the companys income taxes. What is the average tax rate? What is the marginal tax rate? Data...
-
Timsung, Inc., has sales of $30,700, costs of $11,100, depreciation expense of $2,100, and interest expense of $1,140. If the tax rate is 40 percent, what is the operating cash flow, or OCF?
-
Sully Corp. currently has an EPS of $2.24, and the benchmark PE ratio for the company is 22. Earnings are expected to grow at 8 percent per year. What is your estimate of the current stock price? (Do...
-
Two ice skaters, Daniel (mass 70.0 kg) and Rebecca (mass 45.0 kg), are practicing. Daniel stops to tie his shoelace and, while at rest, is struck by Rebecca, who is moving at 12.0 m/s before she...
-
A gymnast of mass 5 2 . 0 kg is jumping on a trampoline. She jumps so that her feet reach a maximum height of 2 . 1 6 m above the trampoline and, when she lands, her feet stretch the trampoline 6 5 ....
Study smarter with the SolutionInn App