Question
The current stock price of a company is $68 and the stock is expected to have a dividend yield 3% per year. The instantaneous risk
The current stock price of a company is $68 and the stock is expected to have a dividend yield 3% per year. The instantaneous risk free rate of return is 3.5%. The instantaneous standard deviation of its stock is 35%. You wish to purchase options on this stock with an exercise price of $72 and an expiration date 9 months from now. Using the Black-Scholes Option Pricing Model to price the call option, its hedge ratio (delta) is __________ which is the number of stocks required to hedge against the price risk of holding one option.
A. | -0.5098 | ||||||||||||||||
B. | -0.0246 | ||||||||||||||||
C. | 0.4902 | ||||||||||||||||
D. | 0.3715 | ||||||||||||||||
E. | -0.3278 The current stock price of a company is $68 and the stock is expected to have a dividend yield 3% per year. The instantaneous risk free rate of return is 3.5%. The instantaneous standard deviation of its stock is 35%. You wish to purchase options on this stock with an exercise price of $72 and an expiration date 9 months from now. Using the Black-Scholes Option Pricing Model, the put option should be worth __________ today.
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