Question

The current spot price of a stock is $38.00, the expected rate of return (per annum)...

The current spot price of a stock is $38.00, the expected rate of return (per annum) of the stock is 9.7%, and the weekly volatility of the stock is 3.4%. The risk-free rate (per annum) is 4.6%.

Assume there are 52 weeks in a year. Additionally, assume the log-normal model for the stock. Let X be a random variable denoting the natural log of the price of the stock in 12 months, where X is normally distributed. Compute the mean μμ and standard deviation σσ of X .

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Current stock price is $150; volatility is 20% per annum. An at-the-money European put option on...
Current stock price is $150; volatility is 20% per annum. An at-the-money European put option on the stock expires in 3 months. Risk free rate is 5% per annum, continuously compounded. There is no dividend expected over the next 3 months. Use a 3-step CRR model to price this option.
Consider an option on a non-dividend-paying stock when the stock price is $52, the exercise price...
Consider an option on a non-dividend-paying stock when the stock price is $52, the exercise price is $50, the risk-free interest rate is 10% per annum, the volatility is 30% per annum, and time to maturity is 3 months What is the price of the option if it is a European call?
What is the price of a European call option on a non-dividend-paying stock when the stock...
What is the price of a European call option on a non-dividend-paying stock when the stock price is $52, the strike price is $50, the risk-free interest rate is 12% per annum, the volatility is 30% per annum, and the time to maturity is three months? (Hint: Remember Black- Sholes-Merton Model. Please refer to the N(d) tables provided to you to pick the N values you need)
Assume risk-free rate is 5% per annum continuously compounded. Use Black-Scholes formula to find the price...
Assume risk-free rate is 5% per annum continuously compounded. Use Black-Scholes formula to find the price the following options: European call with strike price of $72 and one year to maturity on a non-dividend-paying stock trading at $65 with volatility of 40%. European put with strike price of $65 and one year to maturity on a non-dividend-paying stock trading at $72 with volatility of 40%
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price...
Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months. Assume that the stock is due to go ex-dividend in 1.5 months. The expected dividend is 50 cents. Using the Black-Scholes-Merton model, what is the price of the option if it is a European put?
The current price of a non-dividend paying stock is $50. Use a two-step tree to value...
The current price of a non-dividend paying stock is $50. Use a two-step tree to value a European put option on the stock with a strike price of $50 that expires in 12 months. Each step is 6 months, the risk free rate is 5% per annum, and the volatility is 50%. What is the value of the option according to the two-step binomial mode
The value of the S&P500 stock index is 1,000. The risk-free interest rate is 3% per...
The value of the S&P500 stock index is 1,000. The risk-free interest rate is 3% per annum with continuous compounding. The dividend yield on the S&P 500 is 1%, and the volatility of the index is 20% per annum. Find the delta on a 6 months put option with strike price 950. Interpret your result.
The volatility of a non-dividend-paying stock whose price is $40, is 35%. The risk-free rate is...
The volatility of a non-dividend-paying stock whose price is $40, is 35%. The risk-free rate is 6% per annum (continuously compounded) for all maturities. Use a two-step tree to calculate the value of a derivative that pays off [max(?!−52,0)]" where is the stock price in six months?
The volatility of a non-dividend-paying stock whose price is $50, is 30%. The risk-free rate is...
The volatility of a non-dividend-paying stock whose price is $50, is 30%. The risk-free rate is 5% per annum (continuously compounded) for all maturities. Use a two-step tree to calculate the value of a derivative that pays off [max(?! − 63, 0)]" where ST is the stock price in six months?
The volatility of a non-dividend-paying stock whose price is $50, is 30%. The risk-free rate is...
The volatility of a non-dividend-paying stock whose price is $50, is 30%. The risk-free rate is 5% per annum (continuously compounded) for all maturities. Use a two-step tree to calculate the value of a derivative that pays off [max (St − 63, 0)]" where is the stock price in six months?