Question
a) The current DJIA is 18,000. The standard deviation of DJIA is 15% per annum. Dividend yields are expected to be 0.3% per month. The
a) The current DJIA is 18,000. The standard deviation of DJIA is 15% per annum. Dividend yields are expected to be 0.3% per month. The annual risk-free rate is 3%. What is the price of a European call on DJIA which has a strike price of 18,200 and expires in 6 months?
| A. | $327.25 | |
| B. | $412.76 | |
| C. | $633.81 | |
| D. | $913.20 |
b) The current exchange rate for Japanese yen against US dollar is 106 yens/US dollar. The strike price is 110. You estimate that the standard deviation of the exchange rate is about 15% per annum. The annual risk-free rate is 3% in the US and 1% in Japan. What is the per-share price of a 3-month European call on Japanese yen?
| A. | $1.78 | |
| B. | $7.04 | |
| C. | $3.45 | |
| D. | $5.22 |
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Principles Of Banking
Authors: Allyn C Buzzel
11th Edition
089982689X, 9780899826899
