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Call options on common stock

Cola Company has call options on its common stock traded in the market. The options have an exercise price of $45 and expire in 156 days. The current price of the Cola stock is $44.375. The risk-free rate is $7% per year and the standard deviation of the stock returns is 0.31. The value of [d1] is (approximately)?

Put-Call Parity

A European put option on St. Paul Insurance (SPC) with a strike price of $40 and 1 year to expiration is trading at a price of $2. A European call option on SPC with a strike price of 40 and 1 year to expiration is trading at a price of $15. The risk-free interest rate is 5.129329% per year, compounded continuously (the present

What are the break even points for the buyer of the call option and for the buyer of the put option? Given this information, what would be your gain if you use $1,000,000 and excute locational arbitrage. What is the approximate five-year forecast of the peso's spot rate if the five-year forward rate is used as a forecast? From the perspective of US invetors with $1,000,000, what would be rate of return under covered interest arbitrage?

1) The premium on a pound call and put option is $.03 per unit. The exercise priceis $1.60. What are the break even points for the buyer of the call option and for the buyer of the put option? (Assume zero tranasactions cost and that the buyer and seller of the put option are speculators). 2) Assume the bid rate of a new Ze

Cerberus/Chrysler: For or Against

I could use some help: I need to write a paper that states if one should be for or against the Cerberus/Chrysler merger. Within the paper, it should focus on the following: a. Shareholders value b. Market share c. Financial impact I have added some articles for reference.

Suppose you own a stock that is currently trading for $65.

P.311 22. Suppose you own a stock that is currently trading for $65. You purchase it for $60. You would like to wait a while before you sell it because you think there is a good chance the stock will increase further. a. How can you structure a transaction that will insure that you can sell the stock for $65, even if it fa

Multiple choice questions on options: Insuring a portfolio identical to the S&P 500, call options, t bills, dynamic hedging, call delta, cash-or-nothing options, contingent-pay option, lookback call option, path-independent option, weather derivative payoffs

1. Answer questions 1-4 about insuring a portfolio identical to the S&P 500 worth $12,500,000 with a 3-month horizon. The risk-free rate is 7%. Three-month t-bills are available at a price of $98.64 per $100 face value. The S&P 500 is at 385. Puts with an exercise price of 390 are available at a price of 13. Calls with an exerc

Value of European Call Option using Binomial Tree

The share value of Drummond, Griffin and McNabb, a New Orleans publishing house, is currently trading at $100.00 but is expected, 90 days from today, to have risen to $150.00 or to have declined to $50.00, depending on critical reviews of its new biography of Ezra Pound. Assuming the riskless interest rate over the next 90 days

A 90-day European call option on a share of stock

Options and contingent claims p.414 5. A 90-day European call option on a share of stock of Toshiro Corporation is currently trading at 2,000 yen whereas the current price of the share itself is 2,400 yen. Ninety-day zero-coupon securities issued by the government of Japan are selling for 9,855 yen per 10,000 yen face valu

Valuation of Common Stocks Problem

The Digital Growth Corp. Pays no cash dividends currently and is not expected to for the next 5 years. Its latest EPS was $10, all of which was reinvested in the company. The firm's expected ROE for the next 5 years is 20% per year, and during this time it is expected to continue to reinvest all of its earnings. Afterward, th

Valuation of Common Stocks - Slogro Corporation

The stock of Slogro Corporation is currently selling for $10 per share. Earnings per share in the coming year are expected to be $2 per share. The company has a policy of paying out 60% of its earnings each year in divedends. The rest is retained and invested in projects that earn a 20% rate of return per year. This situatio

Currency Derivatives

1. When would a U.S. firm consider purchasing a call option in euros for hedging? 2. When would a U.S. firm consider purchasing a put option on euros for hedging?

Compare and Contrast Currency Derivatives

1. Compare and contrast forward and futures contracts 2. How can currency futures be used by corporations? 3. How can currency futures be used by speculators? 4. What is a currency call option? What is a currency put option?

British pounds and put options

Alice Duever purchased a put option on British pounds for $.04 per unit. The strike price was $1.80 and the spot rate at the time the pound option exercised was $1.59. Assume there are 31,250 units in a British pound option. What was Alice's net profit on the option?

Selling Currency Put Options

Question: Mark Jones sold a put option on Canadian dollars for $.03 per unit. The strike price was $.75, and the spot rate at the time the option was exercised was $.72. Assume Mark immediately sold off the Canadian dollars received when the option was exercised. Also assume that there are 50,000 units in a Canadian dollar op

How to calculate annual contract rate

Find attached problem 14-1a can not get past calculating bonds. QS 14-1 Bond terminology C1 Enter the letter of the description A through H that best fits each term 1 through 8. A. Records and tracks the bondholders' names. B. Is unsecured; backed only by the issuer's credit standing. C. Has varying maturity dates for amo

Business: Put Call Parity

The stock of LaDolce Vita Ltd. Currently lists for $360.00 a share, while 1-year European call options on this stock with an exercise price of $150 sell for $290. European put options with the same expiration date and exercise price sell for $69.53. Infer the yield on a 1-year zero coupon government bond sold today.

Lester Electronics Gap Analysis

Lester Electronics Gap Analysis Using the Gap Analysis Template, prepare a 1,400-1,750-word paper in which you complete table 1, table 2, table 3, and perform a gap analysis for Lester Electronics. Be sure to incorporate appropriate citations from your readings. NOTE: The word count does not include the tables. Review the r

Bond and Conversion Value

Assist the holder of a $1,000 par value convertible bond in determining whether to convert, given that the conversion ratio is 15.5 and that the stock is currently selling for $70 per share. Calculate both the bond value and conversion value.

Binomial Model for Valuing a Call Option

The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year.

Calculating a European Call Option

Attached is a problem which requires the calculation of a European Call Option. I would appreciate your assistance in solving this problem so I can use the solution as model to help me understand all the concepts behind writing European Call Options as I am preparing to do the homework. I searched for the solution in the Lib

Hedging exchange rate exposure

How is hedging exchange rate exposure using options different from hedging using forward contracts? What does this suggest about the costs of hedging with options rather than forwards?

portfolio of three stocks

A portfolio of three stocks with total market value of $1,000,000 currently has a beta of 1.4. In light of an expected market downturn, you wish to reduce the portfolio beta to no more than 1.0. Two stocks are likely candidates for sale, one with a beta of 1.8 and a market value of $200,000 and the other with a beta of 1.5 and a

Hedging Transaction- MCQ

1. Which of the following is the least effective way of hedging transaction exposure in the long run? a. long-term forward contract. b. currency swap. c. parallel loan. d. money market hedge. 2. If interest rate parity exists and transactions costs are zero, the hedging of payables in euros with a forward he

Call and Put Options .

What are call and put options? What is the premium and and what is the strike price? How are American and European options different? How do options differ from futures?