21. The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero. An investor sells six- month call options with a strike price of $32. Which of the following hedges the position? A. Buy 0.6 shares for each call option sold B. Buy 0.4 shares for each call option sold C. Short 0.6 shares for each call option sold D. Short 0.4 shares for each call option sold 22. The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero. What is the risk-neutral probability of that the stock price will be $36? A. 0.6 B. 0.5 C. 0.4 D. 0.3 23. The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero. An investor sells call options with a strike price of $32. What is the value of each call option? A. $1.6 B. $2.0 C. $2.4 D. $3.0 24. The current price of a non-dividend-paying stock is $40. Over the next year it is expected to rise to $42 or fall to $37. An investor buys one-year put options with a strike price of $41. Which of the following is necessary to hedge the position? A. Buy 0.2 shares for each option purchased B. Sell 0.2 shares for each option purchased C. Buy 0.8 shares for each option purchased D. Sell 0.8 shares for each option purchased 25. The current price of a non-dividend paying stock is $40. Over the next year it is expected to rise to $42 or fall to $37. An investor buys put options with a strike price of $41. What is the value of each option? The risk-free interest rate is 2% per annum with continuous compounding. A. $3.93 B. $2.93 C. $1.93 D. $0.93