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1) A stock is currently selling for $43. In one period, the stock will move up b

ID: 2752746 • Letter: 1

Question

1)

A stock is currently selling for $43. In one period, the stock will move up by a factor of 1.26 or down by a factor of 0.59. A call option with a strike price of $53 is available. If the risk-free rate of interest is 2.5 percent for this period, what is the value of the call option? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  

2)

A stock is currently priced at $42 and will move up by a factor or 1.23 or down by a factor of 0.91 each period over each of the next two periods. The risk-free rate of interest is 3 percent. Calculate the value of a put by solving for the value of a call and then using put-call parity. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  

3)

What is the value of a call option if the underlying stock price is $71, the strike price is $60, the underlying stock volatility is 31 percent, and the risk-free rate is 5.4 percent? Assume the option has 144 days to expiration. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

  

  Call option $

Explanation / Answer

Note: Please post the remaining questions seperately.

Underlying stock price $                                           44 Current price $                                           43 Strike price $                                           53 Value of call option (Underlying stock price/[Current price-Strike price])
(44.26/(53-43]) $                                           10