T-bills currently yield 5.7 percent. Stock in Nina Manufacturing is currently selling for $56 per share. There is no possibility that the stock will be worth less than $49 per share in one year. (Round answers to 2 decimal places. If the answer is zero, input as "0".)

a. The value of a call option with an exercise price of $42 is $________. The intrinsic value is $14.

b. The value of a call option with an exercise price of $30 is $_________ . The intrinsic value is $26.

c. The value of a put option with an exercise price of $42 is $_________. The intrinsic value is $0.

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T-bills currently yield 5.7 percent. Stock in Nina Manufacturing is currently selling for $56 per share. There is no possibility that the stock will be worth less than $49 per share in one year. (Round answers to 2 decimal places. If the answer is zero, input as "0".)

a. The value of a call option with an exercise price of $42 is $________. The intrinsic value is $14.

A person can buy the call and short the stock.
Amount received on shorting the stock= $56
If this amount is invested at the risk free rate of 5.70%
Amount at the end of 1 year= $59.28 =56 x exp ( 5.7% )
Since there is no possibility that the stock will be worth less than $49 per share in one year, ie the share price at the end of ...

Solution Summary

The value of call an put options are calculated for different exercise prices.

Construct a spreadsheet that can be used for calculating Black-Scholes call option prices. Before proceeding, verify your model using the following parameters:
St = $60.00
K = $60.00
rf = 0.02
T = 0.3333 (3 months)
sigma (volatility) = 0.49
Ct = $6.8927
1. Using the values of K, rf, T, and sigma; specified above, t

Construct a spreadsheet that can be used for calculating Black-Scholes call option prices. Before proceeding, verify your model using the following parameters:
St = $60.00
K = $60.00
rf = 0.025
T = 0.5 (6 months)
σ = 0.35
Ct = $6.2523
1. Using the values of K, rf, T, and σ specified above, tabulate and plot c

8-1
A call option on Bedrock Boulders stock has a market price of $7. The stock sells for $30 a share and the option has an exercise price of $25 a share.
a. What is the exercise value of the call option?
b. What is the premium on the option?
8-3
Assume that you have been given the following information on Purcell I

AD 13: The Dow Jones Industrial Average on August 15, 2008 was 11,660 and the price of the December 117 call was $3.50. Assume the risk-free rate is 4.2%, the dividend yield is 2% and the option expires on December 25 (options markets are closed the day after Christmas).
Q1: Use Derivagem to calculate the implied volatility o

OK, please correct me if I am wrong, but a put option is when your stock is sold automatically when the price drops below a certain level.
a call is the option to purchase stock at a given price.
If you have the amount that a put option would cost - how would you figure out what a call option would cost?
3 month put optio

A stock has a spot price of $35. Its May options are about to expire. One of its puts is worth $5 and one of its calls is worth $5. The exercise price of the put must be ___A__ and the exercise price of the call must be ___B__. (please show work for A & B)

1. Given the following:
S=$68, C=$15, Rf =10%, X=$60, and time to maturity of call = 3 month.
a. What is the value of a put with the same characteristics as the call above?
b. Suppose that the put in part "a" is trading for $ 3.00: Indicate clearly the transactions you should undertake in order to create a risk-free arbitrage

The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with an exercise price of $32 and one-year until expiration has a current value of $6.56.
What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?

P15-16. Explain the following paradox. A put option is a highly volatile security. If the underlying stock has a positive beta, then a put option on that stock will have a negative beta (because the put and the stock move in opposite directions).
According to the CAPM, an asset with a negative beta, such as the put option, has