Question

You wish to write one European Call contract on Zoom (ZM) with a strike price of...

You wish to write one European Call contract on Zoom (ZM) with a strike price of $175. Zoom's current price is $158.01, has a u of 1.25, and d of 0.79. The risk free rate is 1% per period. Use a two period binomial model. How many shares of Zoom do you need to purchase to hedge your price risk when you write the call? Note: Answer in number of shares, report up to two decimal places.

Homework Answers

Answer #1

ANSWER IN THE IMAGE ((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

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
You buy a call on Pfizer (PFE) with a strike price of $35. Pfizer's current price...
You buy a call on Pfizer (PFE) with a strike price of $35. Pfizer's current price is $37.82, has a u of 1.08, and a d of 0.92. The risk free rate is 1% per period. Use a one period binomial model. If Pfizer's price goes up, what is your holding period return? Note: Answer in decimal form, report four decimal places.
You buy a call on Pfizer (PFE) with a strike price of $35. Pfizer's current price...
You buy a call on Pfizer (PFE) with a strike price of $35. Pfizer's current price is $37.82, has a u of 1.08, and a d of 0.92. The risk free rate is 1% per period. Use a one period binomial model. If Pfizer's price goes up, what is your holding period return? Note: Answer in decimal form, report four decimal places.
You buy a call on Pfizer (PFE) with a strike price of $37. Pfizer's current price...
You buy a call on Pfizer (PFE) with a strike price of $37. Pfizer's current price is $37.82, has a u of 1.05, and a d of 0.95. The risk free rate is 1% per period. Use a one period binomial model. If Pfizer's price goes up, what is your holding period return?
1- A one-year European call option on Stanley Industries stock with a strike price of $55...
1- A one-year European call option on Stanley Industries stock with a strike price of $55 is currently trading for $75 per share. The stock pays no dividends. A one-year European put option on the stock with a strike price of $55 is currently trading for $100. If the risk-free interest rate is 10 percent per year, then what is the current price on one share of Stanley stock assuming no arbitrage? 2- The current price of MB Industries stock...
For A 6-month European call option on a stock, you are given: (1) The stock price...
For A 6-month European call option on a stock, you are given: (1) The stock price is 150. (2) The strike price is 130. (3) u=1.3u=1.3 and d=0.7d=0.7. (4) The continuously compounded risk-free rate is 6%. (5) There are no dividends. The option is modeled with a 2-period binomial tree. Determine the option premium.
There is a six month European call option available on XYZ stock with a strike price...
There is a six month European call option available on XYZ stock with a strike price of $90. Build a two step binomial tree to value this option. The risk free rate is 2% (per period) and the current stock price is $100. The stock can go up by 20% each period or down by 20% each period. Select one: a. $14.53 b. $17.21 c. $18.56 d. $12.79 e. $19.20
Consider a European call with an exercise price of 50 on a stock priced at 60....
Consider a European call with an exercise price of 50 on a stock priced at 60. The stock can go up by 15% or down by 20% each of the two binomial periods. The risk-free rate is 10%. Determine the price of the option today. Then construct a risk-free hedge for a long stock and a short option. At each point in the binomial tree, show the composition and value of the hedge portfolio. For period 1 (that is h),...
Suppose that a 6-month European call A option on a stock with a strike price of...
Suppose that a 6-month European call A option on a stock with a strike price of $75 costs $5 and is held until maturity, and 6-month European call B option on a stock with a strike price of $80 costs $3 and is held until maturity. The underlying stock price is $73 with a volatility of 15%. Risk-free interest rates (all maturities) are 10% per annum with continuous compounding. Use put-call parity to explain how would you construct a European...
A European call option on a non-dividend-payment stock with a strike price of $18 and an...
A European call option on a non-dividend-payment stock with a strike price of $18 and an expiration date in one year costs $3. The stock price is $20 and the risk free rate is 10% per annum.Can u design an arbitrage scheme to expolit this situation?
The current price of a stock is $94 & European call options with a strike of...
The current price of a stock is $94 & European call options with a strike of $95 currently sell for $4.70. An investor is trying to decide between buying 100 shares of stock and buying 2,000 call options (= 20 option contracts). A. At what stock price would the investor be indifferent between these 2 trades? B. At what stock prices would the investor be better off with the option contract purchase?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT