10 TSLA is a non-dividend paying stock. The price of one TSLA share today is $210. TSLA price volatility is 60% per annum. Assumethat the Treasury spot curve is flat at 4% per annum CC.1.Use a CRR two-step binomial tree to value a 1-year European Put option on the stock with a strike price of $210. Show yourvaluations on the tree below.||||1111112. Use a CRR two-step binomial tree to value a 1-year American Put option on the stock with a strike price of $210.Show your valuations on the tree below.3. Use BSM to value a 1-year European Put option on the stock with a strike price of $210. Write down theequations and value of put below.

An option is a type of financial instrument that is based on the value of underlying securities,…

TSLA is a non-dividend paying stock. The price of one TSLA share today is $210. TSLA price volatility is 60% per annum. Assume that the Treasury spot curve is flat at 4% per annum CC. 1. Use a CRR two-step binomial tree to value a 1-year European Put option on the stock with a strike price of $210. Show your valuations on the tree below. || 2. Use a CRR two-step binomial tree to value a 1-year American Put option on the stock with a strike price of $210. Show your valuations on the tree below. |||| 3. Use BSM to value ‒‒‒‒‒‒ a 1-year European Put option on the stock with a strike price of $210. Write down the equations and value of put below.

TSLA is a non-dividend paying stock. The price of one TSLA share today is $210. TSLA price volatility is 60% per annum. Assume that the Treasury spot curve is flat at 4% per annum CC. 1. Use a CRR two-step binomial tree to value a 1-year European Put option on the stock with a strike price of $210. Show your valuations on the tree below. || 2. Use a CRR two-step binomial tree to value a 1-year American Put option on the stock with a strike price of $210. Show your valuations on the tree below. |||| 3. Use BSM to value ‒‒‒‒‒‒ a 1-year European Put option on the stock with a strike price of $210. Write down the equations and value of put below.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose XYZ stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year eective annual interest rate is 10%. (a) Graph the payo and prot diagrams for a forward contract on XYZ stock with a forward price of $55. (b) Is there any advantage to investing in the stock or the forward contract? Why? (c) Suppose XYZ paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?
Suppose that Stock XYZ is currently trading at $50 and does not pay any dividends. Using a binomial tree with two periods, we would like to price a European call option with a strike of $50 and a maturity of six months. Assume that annual continuously compounded interest rate is 1% and the volatility of the stock is 30% per year. What is the value of q? 0.5565 0.4709 0.5000 0.3401 0.5000. You selected this answer.
The current price of a non- dividend paying stock is $38.52. Use a two-step tree to value a European call option on the stock with a strike price $32.3 that expires in 12 months. The risk free rate is 9.9% per annum, and the volatility is 28.1 % . What is the option price?
Suppose a non-dividend paying stock is trading at $175 per share and has a volatility of 45%. What is the fair price of a 9-month European put option with a strike price of $190 per share using 1 binomial period? Assume the risk-free rate is 1%. Round to the nearest $0.01.
Suppose a non-dividend paying stock is trading at $175 per share and has a volatility of 20%. What is the fair price of a 3-month European call option with a strike price of $190 per share using 1 binomial period? Assume the risk-free rate is 1%. Round to the nearest $0.01.
A non-dividend paying stock is trading at 20; the exercise price of it's European call is 18 The risk-free rate is 6.0% per annum, the volatility is 39.60% per annum, and the maturity is 6-months. What is the value of N(d₂ )--the probability of the option being exercised? Formula: d₁ = [In S/X + rc T + (0²T)/2] / ( √T) d₂ = d₁ - 0 √T [Caution: answer the value of N(d₂) using Normsdist in Excel, and not just the value of (d₂)] Question 14 [Exactly the same problem as above, Continued] A non-dividend paying stock is trading at 20; the exercise price of it's European call is 18 The risk-free rate is 6.0% per annum, the volatility is 39.60% per annum, and the maturity is 6-months. What is the price of this European Call Option? Formula: European co = So N(d₁) - Xe-rcT N(d₂) [Caution: find the value of N(d₁) and N(d₂) using Normsdist in Excel]
Suppose company B stock is last time traded at 68.23$, and our analysis shows that in one year from now, its price would either increase or decrease by 25%. (i.e. d=0.75, u=1.25) Assume that risk-free rate is 2.5% and the company pays no dividend in this time period. 4) What would be the payoff for a long position on European Call Option written on Company B equity, with time to maturity of 1 year, and strike price of 75$? Calculate the payoff for the up and down scenarios
3) Suppose that the price of a non-dividend-paying stock is $27, its vo itility is 20%, and the risk- free rate for all maturities is 6% per annum. Provide a table showing the relationship between profit and final stock price for a butterfly spread using European put option with strike prices of $20, $25, and $30 and a maturity of one year. Ignore the impact of time a e of money.
Suppose that Stock XYZ is currently trading at $50 and does not pay any dividends. Using a binomial tree with two periods, we would like to'price a European down-and-in call option written on this stock with a strike price of $40, barrier level of $48 and expiration date in three months. Assume that annual continuously compounded interest rate is 5% and the volatility of the stock is 20% per year. What is the price of the barrier option? 1.01 9.45 3.22 7.28
The current price of a non-dividend paying stock is $30. Use a two -step tree to value a European call option on the stock with a strike price of $32 that expires in 6 months. Each step is 3 months, the risk free rate is 8% per annum with continuous compounding. What is the option price when the volatility is 20%? (Hint: Calculate u and d using the CRR approach.) A. $1.48 B. $1.08 C. $1.68 D. $1.28
Suppose that Stock XYZ is currently trading at $50 and does not pay any dividends. Using a binomial tree with two periods, we would like to price a European down-and-in call option written on this stock with a strike price of $40, barrier level of $48 and expiration date in three months. Assume that annual continuously compounded interest rate is 5% and the volatility of the stock is 20% per year. What is the price of the barrier option? 0.7.28 0.9.45 O101 O 322
Suppose the value of the S&P 500 stock index is currently 2,000.a. If the 1-year T-bill rate is 3% and the expected dividend yield on the S&P 500 is 2%, what should the 1-year maturity futures price be?b. What if the T-bill rate is less than the dividend yield, for example, 1%?

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