The shares of RIL Ltd are currently priced at Rs.415 and call option exercisable in 3 months timehas an exercise rate of Rs.400risk free rate of interest is 5% per annum andstandard deviation (volatility) of share price is 22% Calculate the value of call option
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- A non-dividend-paying stock is currently selling for $50, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a short position in a six-month forward contract on the stock. a. What is the forward price? (sample answer: $25.45) b. What is the initial value of the forward contract? (sample answer: $25.45) c. Three months later, the price of the stock is $48 and the risk-free rate is still 8% per annum. What is the forward price now? (sample answer: $25.45) What is the value of the short position in the forward contract? (sample answer: $25.45 or -$25.45A stock currently trades at R84 and the interest rate is 1.25%. The 6-month forward price of this stock is quoted at R85. Construct an arbitrage strategy given this scenarioA one-year long forward contract on a dividend-paying stock is entered into, when the stock price is $40 and the risk-free rate of interest is 10% per annum with continuous compounding. The dividend yield on the index is 2% per annum with continuous compounding. What are the forward price and the initial value of the forward contract?
- The dividend yield of a portfolio of shares with current price of £673,000 is 2.8% pa payable continuously. Calculate the forward price of a one-year forward contract, based on the portfolio, if we assume dividends are received continuously and the risk - free rate of interest is 4.6028% pa effective.1) Assume that the risk-free rate is 7% per annum (continuous compounding) for all maturities. Compute the three-month forward prices of the following assets: i) A share that will distribute a $8 dividend in 2 months and a $12 dividend in six months. The current spot price of the share is $85. ii) The Swiss franc. The current spot price is 1.4 dollars for 1 Swiss franc and the foreign (i.e., the Swiss) risk-free rate is 6% per annum (continuous compounding).SleazeCo stock is currently at $100 per share. There are puts and calls written on SleazeCo stock that expire in one year and have a strike price of $100. The continuously compound risk-free rate of interest is .01 (1%) per annum. The price of the call is $3.00 and the price of the put is $3.00. Is there an arbitrage opportunity? How do you know?
- The shares of XYZ Inc. are currently selling for $120 per share. The shares are expected to go up by 10 percent or down by 5 percent in each of the following two months (Month 1 and Month 2). XYZ Inc. is also expected to pay a dividend yield of 2 percent at the end of Month 1. The risk-free rate is 0.5 percent per month. a. What is the value of an American call option on XYZ shares, with an exercise price of $125 and two months to expiration? Use the binomial model to obtain the answer. b. Draw a binomial tree diagram for this American call option, showing the share price, call price, and whether the call should be exercised at each state during the next two months. ***Answer b onlyThe shares of XYZ Inc. are currently selling for $120 per share. The shares are expected to go up by 10 percent or down by 5 percent in each of the following two months (Month 1 and Month 2). XYZ Inc. is also expected to pay a dividend yield of 2 percent at the end of Month 1. The risk-free rate is 0.5 percent per month. a. What is the value of an American call option on XYZ shares, with an exercise price of $125 and two months to expiration? Use the binomial model to obtain the answer.Shares in company A are currently trading at $10 and are expected to be worth either $16 or $8 next year. At the same time shares in company B are currently selling for $20 and are expected to be worth $38 or $10 next year. The risk free rate consistent with the previous information is equal to a. 20% b. 50% c. 12.5% d. 0%
- Share of mars ltd is currently sold at 20$, divident payment is nil. After one year its price may go upto $23 with 65% probability. If you purchase 400 shares of Mars Ltd now with 90% borrowed fund which you can borrow @ 8% what would be your 1. expected quantum of return 2. Expected quantum of risk ?Pixar stock is expected to pay a single $1.7 dividend in 2.0 months. Suppose you enter into a 7.0 month forward contract to buy one share of Pixar stock when the share price is $40.4 per and the risk-free interest rate is 6.25 percent continuously compounded. What is the forward price? 37.331 40.155 43.645 40.137Assuming semiannual compundingwith 15 years to maturity paying 1,000.00 at maturity for YTM of 7%, 11%, and 15% what is the price of a zero coupon bond for each YTM? Financial Calculator for 7%: n = 30, I/Y = 7%, CPT PV, PMT = 0, FV = 1000. Price = $131.37. Financial Calculator for 11%: n = 30, I/Y = 11%, CPT PV, PMT = 0, FV = 1000. Price = $43.68. Financial Calculator for 15%: n = 30, I/Y = 15%, CPT PV, PMT = 0, FV = 1000. Price = $15.10.