Wesleyville Markets stock is selling for $36 a share. The 9-month $40 call on this stock is selling for $2.23 while the 9-month $40 put is priced at $5.63. What is the continuously compounded risk-free rate of return?
($40 × e-R × 0.75) = -$2.23 + $36 + $5.63
$40 e-0.75R = $39.40 ln(e-0.75R) = ln0.985 -0.75R = -0.0151 R = 2.02 percent |
57.
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The stock of Edwards Homes, Inc. has a current market value of $23 a share. The 3-month call with a strike price of $20 is selling for $3.80 while the 3-month put with a strike price of $20 is priced at $0.54. What is the continuously compounded risk-free rate of return?
($20 × e-R × 0.25) = -$3.80 + $23 + $0.54
$20 e-0.25R = $19.74 ln(e-0.25R) = ln 0.987 -0.25R = -0.013085 R = 5.23 percent |
58.
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What is the value of d2 given the following information on a stock?
d2 = 0.63355 - [0.58 × (0.751/2)] = 0.1313
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59.
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Given the following information, what is the value of d2 as it is used in the Black-Scholes option pricing model?
d2 = -0.65829 - [0.55 × (0.751/2)] = -1.1346
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