Question

The current futures price of a stock is $15 per share. One month later, when the...

The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%.

  1. Please solve the futures call option premium based on the fact that at time zero, the cost of acquiring a portfolio is equal to the value of the portfolio
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The answer was inserted through a picture

All amounts are in $

​​​​​value is obtained as below

For upper limit = 16.5 - 14.5 = 2

For lower limit = 14 - 14.5 = -0.5

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The current futures price of a stock is $15 per share. One month later, when the...
The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%. Please solve the futures call option premium based on the fact that at time zero, the cost of acquiring a portfolio is equal to the value of the portfolio.
The current futures price of a stock is $15 per share. One month later, when the...
The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%. Please solve the futures call option premium based on the fact that at time zero, the cost of acquiring a portfolio is equal to the value of the portfolio
The current futures price of a stock is $15 per share. One month later, when the...
The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%. Please solve the futures call option premium based on the fact that at time zero, the cost of acquiring a portfolio is equal to the value of the portfolio
The current futures price of a stock is $15 per share. One month later, when the...
The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%. Please solve the futures call option premium based on the fact that at time zero, the cost of acquiring a portfolio is equal to the value of the portfolio. (1 mark)
The current futures price of a stock is $15 per share. One month later, when the...
The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%. What is the value of the risk-free portfolio at the maturity?
The current futures price of a stock is $15 per share. One month later, when the...
The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%. What is the cost of futures contract at time zero
The current futures price of a stock is $15 per share. One month later, when the...
The current futures price of a stock is $15 per share. One month later, when the futures option expires, the futures price could have risen to $16.5 per share or declined to $14 per share. The strike price is $14.5. The risk-free rate is 6%. What is the value of long futures contract (per share) at the option maturity? (1 mark)
A 3-month European call on a futures has a strike price of $100. The futures price...
A 3-month European call on a futures has a strike price of $100. The futures price is $100 and the volatility is 20%. The risk-free rate is 2% per annum with continuous compounding. What is the value of the call option? (Use Black-Scholes-Merton valuation for futures options)
The current price of Stock A is $305/share. You believe that the price will change in...
The current price of Stock A is $305/share. You believe that the price will change in the near future, but your are not sure in which direction. To make a profit from the price change, you purchase ONE call option contract (each contract has 100 calls) and TWO put option contracts (each contract has 100 puts) at the same time. The call option and the put option have the same expiration date. The strike price of the call option is...
Find the price of an American call option on a futures if the current spot price...
Find the price of an American call option on a futures if the current spot price is 30, the exercise price is 25, the futures price is 33.70, the risk-free interest rate is 6 percent, the spot asset can go up by 10 percent or down by 8 percent per period and the call expires in two periods, which is also when the futures expires. A. 9.98 B. 8.70 C. 7.73 D. 8.22 E. none of the above please show...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT