Question

You are a research analyst at JPMorgan Investment Management. You are collecting and analyzing data to find the value for a six month European call option and put option on BAC stock. The stock price of BAC is currently $80. The strike price is $78. It is known that at the end of six months it will be either $84 or $76. The risk-free interest rate is 5% per year.

Please choose all correct answers. Please note that each incorrect answer will reduce the score by 10%.

1.

The value of the call option on the stock is $2.81

2.

The call option delta is 0.5

3.

The value of the put option on the stock 0.90

4.

The call option delta is 0.75

5.

The put option delta is -0.25.

6.

The risk neutral probability of an up movement is 0.1908

7.

The put option delta is 0.05

8.

The put option delta is 0.5

9.

The value of the call option on the stock is $4.41

10.

The risk neutral probability of an up movement is 0.25

11.

The risk neutral probability of an up movement is 0.08

12.

The call option delta is 0.05

13.

The value of the put option on the stock is $0.48

14.

The risk neutral probability of an up movement is 0.7532

15.

The value of the put option on the stock 1.90

16.

The put option delta is -0.5

17.

The value of the call option on the stock $38.1

18.

The value of the put option on the stock 2.90

Answer 1

The statements correct are as follows:

4,5,9,13&14. The supporting calculations are as follows: PLEASE LIKE THE ANSWER IF YOU FIND IT HELPFUL OR YOU CAN COMMENT IF YOU NEED CLARITY / EXPLANATION ON ANY POINT.