Use the Black-Scholes formula for the following stock: Time to expiration. 6 months Standard deviation 56% per year Exercise price $55 Stock price $55 Annual interest rate 6% Dividend 0 Recalculate the value of the call with the following changes: a. Time to expiration b. Standard deviation c. Exercise price d. Stock price e. Interest rate 3 months 30% per year $63 $63 9% Select each scenario independently. Note: Round your answers to 2 decimal places. a. b. C. d. نه Value of the Call Option
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- Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price Stock price Annual interest rate Dividend 6 months 53% per year $43 $43 3% 0 Recalculate the value of the call with the following changes: a. Time to expiration b. Standard deviation 3 months c. Exercise price d. Stock price e. Interest rate 25% per year $49 $49 5% Select each scenario independently. Note: Round your answers to 2 decimal places. Value of the Call Option a. C falls to b. C falls to c. C falls to d. C rises to e. C rises toUse the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price Stock price Annual interest rate Dividend 6 months 56% per year $55 $55 6% 0 Recalculate the value of the call with the following changes: a. Time to expiration b. Standard deviation c. Exercise price d. Stock price e. Interest rate 3 months 30% per year $63 $63 9% Select each scenario independently. Note: Round your answers to 2 decimal places. a. b. C. d. e. Value of the Call OptionUse the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 60% per year Exercise price $57 Stock price $57 Annual interest rate 3% Dividend 0 Recalculate the value of the call with the following changes: a. Time to expiration 3 months b. Standard deviation 25% per year c. Exercise price $64 d. Stock price $64 e. Interest rate 6% Select each scenario independently. Note: Round your answers to 2 decimal places.
- Use the Black - Scholes formula for the following stock: Time to expiration 6 months Standard deviation 50% per year Exercise price $52 Stock price $52 Annual interest rate 3% Dividend 0 Recalculate the value of the call with the following changes: a. Time to expiration 3 months b. Standard deviation 25% per year c. Exercise price $60 d. Stock price $60 e. Interest rate 5% Select each scenario independently. Note: Round your answers to 2 decimal places.Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price Stock price Annual interest rate Dividend 6 months 43% per year $58 $57 2% 0 Calculate the value of a call option. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of a call optionHistorical Returns: Expected and Required Rates of Return You have observed the following returns over time: Assume that the risk-free rate is 5% and the market risk premium is 4%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. % Year 2017 2018 2019 2020 2021 % Stock X 12% 17 -13 2 22 % Stock Y 15% 7 -4 3 12 Stock X: Stock Y: b. What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places. Market 13% 12 -10 2 15
- What is the most you should be willing to pay for the stock in the table? Expected Expected Price in 1Dividend in 1 year Required Current Return Price Year $376.29 $3.91 5.80% $89.00Use the Black-Scholes formula for the following stock: Time to expiration Standard deviation Exercise price 6 months 51% per year $41 $39 Annual interest rate 6% Dividend 0 Stock price Calculate the value of a put option. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Value of a put option1. Use the one-period valuation model P = E/(1 + k) + P1/(1 + k) to price the following stocks (remember to decimalize percentages). Earnings (E = $) 1.00 1.00 1.00 0 0 0 1.00 1.50 2.00 0 Required return (k = %) 10 15 20 5 5 5 10 10 10 10 Expected Price Next Year (P1 = $) 20 20 20 20 30 40 50 50 50 1 Answer: Price Today (P = $) 19.10 18.26 17.50 19.05 28.57 38.10 46.36 46.82 47.27 0.91
- Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 52% per year Exercise price $53 Stock price $51 Annual interest rate 2% Dividend 0 Calculate the value of a put option. (Round to 2 decimal places). Value of a put optionProblem: 1. Given six years of percentage return of Stock A and Stock B, identify the expected return, and risk of each instrument. Assume that each year, has equal chances of reoccurrence. Stock A Stock B 20X1 10 20 20X2 -15 -20 20X3 20 -10 20X4 25 30 20X5 -30 -20 20X6 20 60 a. Which of the two stocks is riskier? Why? b. Which of the stocks is expected to yield a higher return? Why? c. Where will you invest? Problem Solving: 1. Suppose you want to buy 10,000 shares of MegaWorld Corporation at a price of 4.00. You put up P10,000 and borrow the rest. What does your account balance sheet would look like? What is your margin? 2. Supposed that in the previous problem you shorted 10,000 shares instead of buying. The initial margin is 60 percent. What does the account balance sheet look like? 3. You deposited P100,000 cash in brokerage account and short sell P200,000 of stocks on margin.…Use the Black-Scholes formula for the following stock: Time to expiration 6 months Standard deviation 46% per year Exercise price $48 Stock price $46 Annual interest rate 6% Dividend 0 Calculate the value of a put option. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Value of a put option