Saturday, November 9, 2019

A stock is selling for $60 per share. A call option with an exercise price of $65 sells for $3.31 and expires in 4 months.

A stock is selling for $60 per share. A call option with an exercise price of $65 sells for $3.31 and expires in 4 months. The risk-free rate of interest is 2.8 percent per year, compounded continuously. What is the price of a put option with the same exercise price and expiration date? 
 
A. 
$5.99

B. 
$6.23

C. 
$6.47

D. 
$7.21

E. 
$8.94
$60 + P = $65e-(0.028)(1/3) + $3.31; P = $7.21


73.
A put option that expires in eight months with an exercise price of $57 sells for $3.85. The stock is currently priced at $59, and the risk-free rate is 3.1 percent per year, compounded continuously. What is the price of a call option with the same exercise price and expiration date? 
 
A. 
$6.67

B. 
$7.02

C. 
$7.34

D. 
$7.71

E. 
$7.80
$59 + $3.85 = $57 e-(0.031)(2/3) + C; C = $7.02


74.
   

What is the price of a put option given the following information?

    
 
A. 
$13.57

B. 
$13.83

C. 
$14.80

D. 
$16.47

E. 
$17.74
d1 = [ln ($78/$81) + (0.04 + 0.642/2) × 0.5]/[0.64 × (0.51/2)] = 0.1871
d2 = 0.1871 - [0.64 × (0.51/2)] = -0.2655
N(d1) = 0.5742
N(d2) = 0.3953
C = $78(0.5742) - ($81e-0.04(0.5)) (0.3953) = $13.40
P = $81e-0.04(0.5) + $13.40 - $78 = $14.80


75.
   

What is the delta of a put option given the following information?

    
 
A. 
-0.685

B. 
-0.315

C. 
0.315

D. 
0.525

E. 
0.685
d1 = [ln ($90/$85) + (0.07 + 0.52/2) × (10/12)]/[0.5 × (10/12)1/2] = 0.4812
N(d1) = 0.685
Put delta = 0.685 - 1 = -0.315

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