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.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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

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
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?
An asset’s price is $41.14 and its volatility is 26% per year. A European call on...
An asset’s price is $41.14 and its volatility is 26% per year. A European call on the asset has nine months until expiration, a strike price of $40.00, and the risk-free interest rate is 2.6% per year. According to a two-period binomial option pricing model, what is the option’s value? 1) $3.88 2) $5.51 3) $3.47 4) $4.47 5) $4.89
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT