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FIU FIN4486 Homework 6 Chapters 13 and 17

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Question;BM stock currently sells for 64 dollars per share. The;implied volatility equals 40.0. The risk-free rate of interest is 5.5 percent;continuously compounded. What is the value of a call option with strike price;69 and maturity 9 months?;Selected Answer;Answers;a. 7.8894;b. 8.9953;c. 12.940;d. 10.101;Question 2;20 out of 20 points;Correct;IBM stock currently sells for 64 dollars per share. The;implied volatility equals 40.0. The risk-free rate of interest is 5.5 percent;continuously compounded. What is the value of a put option with strike price 69;and maturity 9 months?;Selected Answer;b. 10.101;Answers;a. 14.046;b. 10.101;c. 7.8894;d. 8.9953;Question 3;20 out of 20 points;Correct;IBM stock currently sells for 64 dollars per share. The;implied volatility equals 40.0. The risk-free rate of interest is 5.5 percent;continuously compounded. What is the delta of a call option with strike price;69 and maturity 9 months?;Selected Answer;c. 0.52995;Answers;a. 0.47005;b..075132;c. 0.52995;d. -0.27128;Question 4;20 out of 20 points;Correct;IBM stock currently sells for 64 dollars per share. The;implied volatility equals 40.0. The risk-free rate of interest is 5.5 percent;continuously compounded. If you shorted an option on 100 shares of IBM stock;with strike price 69 and maturity 9 months, how many shares of stock would you;have to buy (sell) to create a delta-neutral hedge?;Selected Answer;c. 52.995;Answers;a. 7.5132;b. 188.70;c. 52.995;d. 13.310;Question 5;20 out of 20 points;Correct;IBM stock currently sells for 64 dollars per share. The;implied volatility equals 40.0. The risk-free rate of interest is 5.5 percent;continuously compounded. If you owned a 100 shares of IBM stock with strike;price 69 and maturity 9 months, how many call options would you have to buy;(sell) to create a delta-neutral hedge? Assume each option controls one share;of IBM stock.;Selected Answer;a. 188.70;Answers;a. 188.70;b. 7.5132;c. 1331.0;d. 52.995

 

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