5 8.33 points Problem 16-7 (Algo) Required: Consider a 1-year option with exercise price $75 on a stock with annual standard deviation 15%. The T-bill rate is 3% per year. Find M(1) for stock prices $70, $75, and $80. (Do not round intermediate calculations. Round your answers to 4 decimal places.) Skipped S N(d1) $ 70 $ 75 eBook $ 80 Print References 6 8.33 points Skipped eBook Problem 16-8 (Algo) We will derive a two-state put option value in this problem. Data: S = $170; X = $180; 1+ r=1.10. The two possibilities for S+ are $210 and $90. Required: a. The range of S is $120 while that of P is $90 across the two states. What is the hedge ratio of the put? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Hedge ratio Print References b. Form a portfolio of three shares of stock and four puts. What is the (nonrandom) payoff to this portfolio? (Round your answer to 2 decimal places.) Nonrandom payoff c. What is the present value of the portfolio? (Round your answer to 2 decimal places.) Present value d. Given that the stock currently is selling at $170, calculate the put value. (Do not round intermediate calculations and round your answer to 2 decimal places.) Put value 7 Problem 16-9 (Algo) 8.33 points Skipped We will derive a two-state call option value in this problem. Data: s = $290; X = $300; 1 + r=1.10. The two possibilities for ST are $330 and $180. The portfolio consists of 1 share of stock and 5 calls short. Required: a. The range of S is $150 while that of C is $30 across the two states. What is the hedge ratio of the call? (Round your answer to 2 decimal places.) eBook Hedge ratio Print References b. Calculate the value of a call option on the stock with an exercise price of $300. (Do not use continuous compounding to calculate the present value of X in this example, because the interest rate is quoted as an effective per-period rate.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Call value 8 8.33 points Skipped Problem 16-29 (Algo) Required: The hedge ratio (delta) of an at-the-money call option on IBM is 0.22. The hedge ratio of an at-the-money put option is -0.49. What is the hedge ratio of an at-the-money straddle position on IBM? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Hedge ratio eBook Print References