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how to get that A call option with a strike price of 25 costs 7.90 and a call option with a strike price of 30
how to get that A call option with a strike price of 25 costs 7.90 and a call option with a strike price of 30 costs 4.18.
Suppose that the price of a non-dividend-paying stock is $32. its volatility is 30% and the risk-free rate for all maturities is 5% per annum. Use DerivaGem to calculate the cost of setting up the following positions. In each case provide a table showing the relationship between profit and final stock price. Ignore the impact of discounting 3 a) A bull spread using European call options with strike prices of $25 and $30 and a maturity of six months Solution. (a) A call option with a strike price of 25 costs 7.90 and a call option with a strike price of 30 costs 4.18. The cost of the bull spread is therefore 7.90 - 4.18-3.72. The profits ignoring the impact of discounting are Stock Price Range ST 25 25 ST 30 ST 2 30 Profit 3.72 ST-28.72 1.28 Suppose that the price of a non-dividend-paying stock is $32. its volatility is 30% and the risk-free rate for all maturities is 5% per annum. Use DerivaGem to calculate the cost of setting up the following positions. In each case provide a table showing the relationship between profit and final stock price. Ignore the impact of discounting 3 a) A bull spread using European call options with strike prices of $25 and $30 and a maturity of six months Solution. (a) A call option with a strike price of 25 costs 7.90 and a call option with a strike price of 30 costs 4.18. The cost of the bull spread is therefore 7.90 - 4.18-3.72. The profits ignoring the impact of discounting are Stock Price Range ST 25 25 ST 30 ST 2 30 Profit 3.72 ST-28.72 1.28Step by Step Solution
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