Question
Home Depot stock is currently trading at $317.15. There is a call available that expires in two weeks with a strike price of $320 and
Home Depot stock is currently trading at $317.15. There is a call available that expires in two weeks with a strike price of $320 and an option premium of $6.42.
What is the intrinsic value of this option?
$0 | ||
$1.25 | ||
$2.33 | ||
$4.09 |
How do we adjust a stock's price so that we can use the BSOPM for dividend paying stocks?
A. | Multiply the FV of the dividend payment using continuous compounding by the stock price | |
B. | Multiply the PV of the dividend payment using continuous discounting by the stock price | |
C. | Subtract the FV of the dividend payment using continuous compounding from the stock price | |
D. | Subtract the PV of the dividend payment using continuous discounting from the stock price |
Suppose that we have a stock with a price of $75. We want to price a call option using the binomial model that has a strike price of $82. We are going to use steps of 5 days and price it for 20 days, so today plus four more time steps. The stock has a volatility of 47% and the risk free rate is 1%.
What is our UP multiplier?
A. | .9887 | |
B. | 1.011 | |
C. | 1.057 | |
D. | 1.567 |
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