Currently, a stock has a price of $21.71. At the end of year, its price will either

Fantastic news! We've Found the answer you've been seeking!

Question:

Currently, a stock has a price of $21.71. At the end of year, its price will either be $35 or $15. The annual risk-free rate is 3.2%, based on daily compounding. What is the price of a one-year call option with an exercise price of $22?

a. $1.05

b. $4.67

c. $7.00

d. $9.44

Related Book For answer-question

Fundamentals of Investments Valuation and Management

ISBN: 978-0077283292

5th edition

Authors: Bradford D. Jordan, Thomas W. Miller

See More Books

Posted Date: Nov 20, 2020 01:45 AM

See More Questions

A put option and call option with an exercise price of $85 and three months to expiration sell for $3.15 and 6.12 respectively. If the risk-free rate is 4.8 percent a year, compounded continuously....
A put option and call option with an exercise price of $60 expire in four months and sell for $1.35 and $5.30, respectively. If the stock is currently priced at $63.38, what is the annual...
An equity index call option with an exercise price of $105 will expire in 9 months. The index is worth $98 and has a standard deviation of 0.20 (20%). the index's annual dividend yield (g) is 2%. the...
The US Womens Swimming Team won the 1500 m relay at the 2016 Olympic Games. Here are the completion times, in seconds, for all eight teams that competed in the finals: a. Calculate the sample...
A medical researcher wants to determine how long patients survive once diagnosed with a particular form of cancer. Using data collected on a group of 40 patients with the disease, she observes an...
The lockdowns that were a reaction to the increasing number of deaths from the pandemic in 2020 caused financial hardship to a large number of American households. A U.S. Census Bureau survey asked...
Show that for $g$ and $h$ analytic functions at $z_{0}$, with $g\left(z_{0} ight) eq 0, h\left(z_{0} ight)=0$, and $h^{\prime}\left(z_{0} ight) eq 0$,...
Foley Corporation has seven industry segments with total revenues as follows. Penley $600 Cheng $ 225 Konami 650 Takuhi 200 KSC 250 Molina 700 Red Moon 275 Based only on the revenues test, which...
please answer the requirements, thank you. Javier Co. made the following errors: a. December 31, 20x1 inventory was understated by P20,000. b. December 31, 20x2 inventory was overstated by P45,000....
The idealized cross-section of a two-cell thin-walled wing box is shown below with the data in Table 22.7. If the wing box supports a load of 44,500 N acting along web 25, calculate the shear flow...
A researcher in the Amazon rain forest has discovered that the growth rate for a certain type of tree is influenced by both moonlight and humidity. Using the following models and the fact that the...
John insured a ship against any losses while lying at Mombasa port for a sum of shillings ten million with BADC insurance company limited. He further insured the same ship with Deep sea insurance...
[10] Q6. If angle between two lines is "/4 and slope of one line is 1/2, find slope of other line. Q7. Find derivative of the function f(x) = 2x + 3x-5 at x = 1 also prove that f(0) + 3f (-1) = 0....
A software company has 3 senior developers and 4 junior developers. These developers are working as 3 different teams; 2 sets of '1Senior+1Junior' and 1 set of '1Senior+2Junior'. Productivity levels...
How can interdisciplinary research at the intersection of psychology, sociology, and ecology deepen our comprehension of resilience as a multi-dimensional construct ?
Meir, Benson, and Lau are partners and share income and loss in a 2:3:5 ratio (in percents: Meir, 20%; Benson, 30%; and Lau, 50%). The partnership's capital balances are as follows: Meir, $74,000;...
A tax loopholes encourages corporations that are lightly taxed or not taxable due to losses or tax shelters to issue Blank______. Multiple choice question. preferred stock convertible bonds...
If a process has a six-sigma capability, what is the process capability index? a. 1 b. 2 c. 6 d. 12
Suppose you write 20 call option contracts with a $50 strike. The premium is $4.20. Evaluate your potential gains and losses at option expiration for stock prices of $40, $50, and $60.
During the year, Smashville, Inc., had 12,000 shares of stock outstanding and depreciation expense of $13,000. Calculate the book value per share, earnings per share, and cash flow per share.
Calculate the expected returns for Roll and Ross by filling in the following table (verify your answer by expressing returns as percentages as well asdecimals): Roll Ross State of Probability of...
In its most recent corporate report, Williams, Inc., apologized to its stockholders for not paying a dividend. The report states that management will pay a $$1$ dividend next year. That dividend...
Nancy Ferris bought a building for $$120,000.$ She paid 15 percent down and agreed to pay the balance in 20 equal annual installments. What are the equal installments if the annual interest rate is...
You need $$25,000$ five years from now. You budget to make equal payments at the end of every year into an account that pays an annual interest rate of 7 percent. a. What are your annual payments?...

Currently, a stock has a price of $21.71. At the end of year, its price will either

Question:

Expert Answer:

ap352232 p2... View the full answer

Fundamentals of Investments Valuation and Management

Students also viewed these accounting questions