Find price of call and put options with 6 months to maturity, 0.5% monthly risk free...

  

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Find price of call and put options with 6 months to maturity, 0.5% monthly risk free interest rate, and $45 exercise price with the following data from Day 1 to Day 5 Daily closing prices for the underlying stock are as follows: YOU ARE ALLOWED TO WORK IN GROUP OF UP TO 4 STUDENTS (1 or 2 or 3 or 4 students in the same group) Month Stcok price Day 5 $41.00 Day 4 $42.00 Day 3 $38.00 Day 2 $42.00 Day 1 $40.00 20 years time (life) coupon interest rate 10.00% annually Face Value 1000 YTM 7.00% Yield to maturiy is YTM Price (PV) ?? ($1,317.82) =+PV(B6,B3,B4*B5,85) it is a discount bond because it is selling for less than $1000. Please note INT (8%) < rd (9%) life VB 13.00% $837 Power point slide # 12 (Graph) shows that the price of a discount bond approaches $ 1000 (keeps on moving up) as the maturity reaches zero or the life of the bond expires Similarly, the graph shows that the price of a premium bond approaches $ 1000 (keeps on moving down) as the maturity reaches zero or the life of the bond expires 10 20 13.00% $789 $775 $1,000 30 13.00% And, the graph shows that the price of a par value bond remains $ 1000 (never changes) as the maturity reaches zero or the life of the bond expires 13.00% 7.00% $1,210 $1,317 10 20 7.00% $1,372 $1,000 $1,000 $1,000 30 7.00% 7.00% 10 10.00% 20 10.00% $1,000 $1,000 30 10.00% 10.00% Find price of call and put options with 6 months to maturity, 0.5% monthly risk free interest rate, and $45 exercise price with the following data from Day 1 to Day 5 Daily closing prices for the underlying stock are as follows: YOU ARE ALLOWED TO WORK IN GROUP OF UP TO 4 STUDENTS (1 or 2 or 3 or 4 students in the same group) Month Stcok price Day 5 $41.00 Day 4 $42.00 Day 3 $38.00 Day 2 $42.00 Day 1 $40.00 20 years time (life) coupon interest rate 10.00% annually Face Value 1000 YTM 7.00% Yield to maturiy is YTM Price (PV) ?? ($1,317.82) =+PV(B6,B3,B4*B5,85) it is a discount bond because it is selling for less than $1000. Please note INT (8%) < rd (9%) life VB 13.00% $837 Power point slide # 12 (Graph) shows that the price of a discount bond approaches $ 1000 (keeps on moving up) as the maturity reaches zero or the life of the bond expires Similarly, the graph shows that the price of a premium bond approaches $ 1000 (keeps on moving down) as the maturity reaches zero or the life of the bond expires 10 20 13.00% $789 $775 $1,000 30 13.00% And, the graph shows that the price of a par value bond remains $ 1000 (never changes) as the maturity reaches zero or the life of the bond expires 13.00% 7.00% $1,210 $1,317 10 20 7.00% $1,372 $1,000 $1,000 $1,000 30 7.00% 7.00% 10 10.00% 20 10.00% $1,000 $1,000 30 10.00% 10.00%

Answer rating: 100% (QA)

The value of option is current price minus strike price and if the current pr... View the full answer