Question A.

1. The current market price of an equity share of Penpal Ltd is $ 420. Within a period of 3 months, the maximum and minimum price of it is expected to be $ 500 and $ 400 respectively. If the risk free rate of interest be 8% p.a., what should be the value of a 3 months Call option under the "Risk Neutral" method at the strike rate of $ 450? Given e0.02 = 1.0202.

2. (i) The portions of TC Ltd. are as of now evaluated at $ 415 and call choice exercisable in a quarter of a year's time has an activity pace of $ 400. Danger free financing cost is 5% p.a. what's more, standard deviation (instability) of offer cost is 22%. In light of the supposition that TC Ltd. won't announce any profit over the course of the following three months, is the choice worth purchasing for $ 25?

(ii) Calculate estimation of aforementioned call alternative dependent on Block Scholes valuation model if the current cost is considered as $ 380.

(iii) What might be the value of put alternative if current cost is thought of $ 380.

(iv) If TC Ltd. share cost at present is taken as $ 408 and a profit of $ 10 is required to be paid in the two months time, at that point, compute estimation of the call choice.

3. The half year forward cost of a security is $208.18. The getting rate is 8% per annum payable with month to month rests. What ought to be the spot cost?

4. The after information identify with A Ltd's. share value: Current cost per share$ 1,800 a half year future's cost/share $ 1,950

Accepting it is feasible to get cash on the lookout for exchanges in protections at 12% per annum, you are required:

(i)to figure the hypothetical least cost of a 6-months forward buy; and

(ii)to clarify mediate freedom.