XYZ is trading at $100, a 6 month call option on XYZ struck at $90 is priced
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Question:
XYZ is trading at $100, a 6 month call option on XYZ struck at $90 is priced at $15. 6 month LIBOR is 3% per annum and XYZ has a 1% per annum dividend yield.
a) What is the intrinsic value of the option?
b) What is the time premium?
c) What is the gross carry of the option?
d) How much dividend income does she lose by purchasing the option rather than the stock? What is the net carry of the option?
e) What is the insurance cost of this option?
f) What is the forward price of the stock six months from now?
g) If the volatility used to value the option is 28.28%/year what is the 6 month expected volatility?
Related Book For
International Financial Management
ISBN: 978-0132162760
2nd edition
Authors: Geert Bekaert, Robert J. Hodrick
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