5. In this problem, you will need the following table of N(d) to provide inputs for...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
5. In this problem, you will need the following table of N(d) to provide inputs for a Black-Scholes analysis. For values of d₁ and d2 that do not correspond exactly to values in the table, simply round off d₁ or d2 to the nearest entry on the table. Also, use the approximation that when X and S are close, In(S/X) equals the percentage difference between S and X, expressed as a decimal. For example, In(97/100) = ln(.97) = -.03. d 0.0 0 0.0 5 0.1 0 0.1 5 0.2 0 0.2 5 0.3 0 0.3 5 0.4 0 0.4 5 0.5 0 N(d) 0.50 0 0.52 0 0.54 0 0.56 0 0.57 9 0.59 9 0.61 8 0.63 7 0.65 5 0.67 4 0.69 1 d 0.5 5 0.6 0 0.6 5 0.7 0 0.7 5 0.8 0 0.8 5 0.9 0 0.9 5 N(d) 0.70 9 0.72 6 0.74 2 0.75 0.81 6 0.82 9 1.0 0.84 0 1.0 5 8 0.77 3 0.78 8 0.80 2 1 0.85 3 Suppose that your firm has issued a three-year European call option with an exercise price of $100 on a mutual fund. [Assume for simplicity that it has issued the call on one share of the fund.] Your assignment is to delta hedge the call option. The fund currently sells for $100 per share. It has a standard deviation of 20% per year and T-bills pay 5% per year. The portfolio pays no dividends. a. [10 points] What is the value of the call option? 5. In this problem, you will need the following table of N(d) to provide inputs for a Black-Scholes analysis. For values of d₁ and d2 that do not correspond exactly to values in the table, simply round off d₁ or d2 to the nearest entry on the table. Also, use the approximation that when X and S are close, In(S/X) equals the percentage difference between S and X, expressed as a decimal. For example, In(97/100) = ln(.97) = -.03. d 0.0 0 0.0 5 0.1 0 0.1 5 0.2 0 0.2 5 0.3 0 0.3 5 0.4 0 0.4 5 0.5 0 N(d) 0.50 0 0.52 0 0.54 0 0.56 0 0.57 9 0.59 9 0.61 8 0.63 7 0.65 5 0.67 4 0.69 1 d 0.5 5 0.6 0 0.6 5 0.7 0 0.7 5 0.8 0 0.8 5 0.9 0 0.9 5 N(d) 0.70 9 0.72 6 0.74 2 0.75 0.81 6 0.82 9 1.0 0.84 0 1.0 5 8 0.77 3 0.78 8 0.80 2 1 0.85 3 Suppose that your firm has issued a three-year European call option with an exercise price of $100 on a mutual fund. [Assume for simplicity that it has issued the call on one share of the fund.] Your assignment is to delta hedge the call option. The fund currently sells for $100 per share. It has a standard deviation of 20% per year and T-bills pay 5% per year. The portfolio pays no dividends. a. [10 points] What is the value of the call option?
Expert Answer:
Answer rating: 100% (QA)
QUESTION What are the two sources of cuckoldry that paternal grandfathers face in relation to their grandchildren Paternity uncertainty has proven to ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
Posted Date:
Students also viewed these accounting questions
-
What are the two sources of equity (ownership) capital for the firm?
-
What are the two sources of marketing problems?
-
What are the two sources of government health insurance?
-
Smart Price Company, a producer of black forest cakes, has budgeted sales and production (in units) for the last quarter in 2019 to be as follows: Sales Production October November 26,000 28,000...
-
Sales of the P.J. Cramer Company were $500,000 this year, and they are expected to grow at a compound rate of 20 percent for the next six years. What will be the sales figure at the end of each of...
-
We have seen how the number of electrons and the number of protons affect the size of an atom or ion. However, we have not considered how the number of neutrons affects the size of an atom. Would you...
-
The following table presents the number of grams of protein and the number of calories per 100 grams for each of 18 fast-food products. a. Compute the least-squares regression line for predicting...
-
Thatcher Corporations bonds will mature in 10 years. The bonds have a face value of $1,000 and an 8 percent coupon rate, paid semiannually. The price of the bonds is $1,100. The bonds are callable in...
-
) Charmed, Inc. had net income of $53,000. Accounts Receivable increased by $28,000; inventory decreased by $18,000; accounts payable increased by $4,000 and salaries payable decreased by $1,200. The...
-
Situation Russell International, a publicly traded company, reacquired 500,000 shares of its common stock during July 2008 at a cost of $25 per share. The current market price of the stock was $20...
-
Employers can impose deductions as a necessary part of the contract of employment for: Multiple Choice Cash shortages Inventory shortages Product damage Premiums for group insurance benefits Charges...
-
Discuss the advantages and disadvantages of: (a) qualitative methods of salesperson appraisal; (b) quantitative methods of salesperson appraisal.
-
Interpret the simple effect of effect of alcohol at different levels of lighting.
-
Vial-tek has an existing loan in the amount of \(\$ 3.5\) million with an annual interest rate of \(9.5 \%\). The company provides an internal company-prepared financial statement to the bank under...
-
Fred Oatly is the loan officer of the National Bank of Dallas. National has a loan of \(\$ 260,000\) outstanding to Regional Delivery Service, a company specializing in delivering products of all...
-
Describe how forms are used in QuickBooks Accountant.
-
Majesty Company uses target costing to ensure that its products are profitable. Assume Majesty is planning to introduce a new product with the following estimates: Estimated market price $ Annual...
-
on 8 For the following set of lengths 130, 170, 160, 160, 150, 190 Third quartile is: et red d out of Select one: O a. 160 a question O b. 145 O c. 175 O d. 180
-
What are the four types of out-of-court settlements? Briefly describe each.
-
Oral Roberts Dental Supplies has annual sales of $5,200,000. Ninety percent are on credit. The firm has $559,000 in accounts receivable. Compute the value of the average collection period.
-
How is valuation of any financial asset related to future cash flows?
-
What is a best practice in general? Give examples of best practices in an area unrelated to project management, such as nutrition, exercise, or child rearing.
-
What are some unique features of project management software in general?
-
Why should organizations identify and use best practices? What are the main categories of best practices developed as part of OPM3?
Study smarter with the SolutionInn App