Questions from Business Statistics

Q: A stock price is currently $50. It is known that

A stock price is currently $50. It is known that at the end of 6 months it will be either $45 or $55. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a 6...

Q: The DerivaGem Application Builder functions enable you to investigate how the prices

The DerivaGem Application Builder functions enable you to investigate how the prices of options calculated from a binomial tree converge to the correct value as the number of time steps increases. (Se...

Q: Consider an American call option on a stock. The stock price

Consider an American call option on a stock. The stock price is $70, the time to maturity is 8 months, the risk-free rate of interest is 10% per annum, the exercise price is $65, and the volatility is...

Q: Show that the Black–Scholes–Merton formulas for call and

Show that the Black–Scholes–Merton formulas for call and put options satisfy put–callparity.

Q: The volatility of a stock price is 30% per annum.

The volatility of a stock price is 30% per annum. What is the standard deviation of the percentage price change in one trading day?

Q: A company has an issue of executive stock options outstanding. Should

A company has an issue of executive stock options outstanding. Should dilution be taken into account when the options are valued? Explain your answer.

Q: Calculate the price of a 3-month European put option on

Calculate the price of a 3-month European put option on a non-dividend-paying stock with a strike price of $50 when the current stock price is $50, the risk-free interest rate is 10% per annum, and th...

Q: What difference does it make to your calculations in Problem 15.

What difference does it make to your calculations in Problem 15.4 if a dividend of $1.50 is expected in 2 months?

Q: Does a forward contract on a stock index have the same delta

Does a forward contract on a stock index have the same delta as the corresponding futures contract? Explain your answer.

Q: A stock price is currently $40. Assume that the expected

A stock price is currently $40. Assume that the expected return from the stock is 15% and that its volatility is 25%. What is the probability distribution for the rate of return (with continuous compo...