Question 11pts

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 $28. Assume the risk-free rate is zero. What, to the nearest cent, is the price of a European put option with a strike price of $33? (Your answer should be in the unit of dollar, but without the dollar sign. For example, if your answer is $1.02, just enter 1.02.)

Flag this Question

Question 21pts

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 $28. Assume the risk-free rate is 10% per annum (continuously compounded). What, to the nearest cent, is the price of an American put option with a strike price of $33? (Your answer should be in the unit of dollar, but without the dollar sign. For example, if your answer is $1.02, just enter 1.02.)

Flag this Question

Question 31pts

A stock price is currently $30. During each two-month period for the next four months it is expected to increase by 8% or decrease by 10%. No dividend payment is expected during these two periods. The risk-free interest rate is 5% per annum. If you use a two-step tree to do the valuation, what, to the nearest cent, is the value of a European put option with a strike price of $32 that expires in four months?

Flag this Question

Question 41pts

In question 3 above, what, to the nearest cent, is the value of a American put option with a strike price of $32 that expires in four months? (Your answer should be in the unit of dollar, but without the dollar sign. For example, if your answer is $1.02, just enter 1.02.)

Flag this Question

Question 51pts

The volatility of a stock is 0.3 per annum. In a Cox-Ross-Rubinstein binomial tree in which one step represents a time interval of 6 months, what are the proportional up-movement and down-movement factors,u and d, respectively?

A. u=1.3, d=0.7

B. u=1.15, d=0.85

C. u=1.24, d=0.76

D. u=1.24, d=0.81.

Flag this Question

Question 61pts

The current price of a non-dividend-paying stock is 30. The volatility of the stock is 0.3 per annum. The risk free rate is 0.05 for all maturities. Using the Cox-Ross-Rubinstein binomial tree model with one time step to do the valuation, what is the value of a European call option with a strike price of 32 that expires in 6 months? (Your answer should be in the unit of dollar (up to the precision of cents), but without the dollar sign. For example, if your answer is $1.02, just enter 1.02. Please also think whether your answer will be different if the option is an American option.)

Flag this Question

Question 71pts

A stock price is $100. Volatility is estimated to be 20% per year. What is the an estimate of the standard deviation of the change in the stock price in one week (choose one)?

A. $0.38

B. $2.77

C. $3.02

D. $0.76

Flag this Question

Question 81pts

Consider a six-month European call option on a non-dividend-paying stock. The stock price is $30, the strike price is $29, and the continuously compounded risk-free interest rate is 6% per annum. The volatility of the stock price is 20% per annum. What is price of the call option according to the Black-Schole-Merton model? Please provide you answer in the unit of dollar, to the nearest cent, but without the dollar sign (for example, if your answer is $1.02, write 1.02).

Flag this Question

Question 91pts

A six-month European call option on a non-dividend-paying stock is trading at a price of $3.6. The underlying stock price is $30, the strike price is $29, and the continuously compounded risk-free interest rate is 6% per annum. What is the implied volatility of this option according to the Black-Schole-Merton model? Your answer should be a decimal instead of a percentage, with the precision up to the second digit after the decimal point. For example, if your answer is 50%, write 0.50.

Hint: Ask Derivagem for help on this question.

Flag this Question

Question 101pts

Consider a six-month European call option on an index. The current index value is $2030, the strike price is $2090, the dividend yield is 2% per annum, and the continuously compounded risk-free interest rate is 6% per annum. The volatility of the index is 20% per annum. What is price of the option according to a one-step binomial tree? Please provide your answer in the unit of dollar, to the nearest cent, but without the dollar sign (for example, if your answer is $1.02, write 1.02).

Flag this Question

Question 111pts

Consider a European put option on a currency. The exchange rate is $1.20 per unit of the foreign currency, the strike price is $1.25, the time to maturity is one year, the domestic risk-free rate is 5% per annum, and the foreign risk-free rate is 2% per annum. The volatility of the exchange rate is 0.25. What is the value of this put option according to a two-step binomial tree? Please provide your answer in the unit of dollar, to the nearest cent, but without the dollar sign (for example, if your answer is $1.02, write 1.02).

Flag this Question

Question 121pts

A futures price is currently 40 dollars. It is expected to move up to 44 dollars or down to 34 dollars in the next six months. The continuously-compounded risk-free interest rate is 6% per annum. What is the value of a six-month European call on the futures contract with a strike price of 40 dollars?Please provide your answer in the unit of dollar, to the nearest cent, but without the dollar sign (for example, if your answer is $1.02, write 1.02).