1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
PSYCHO15rus [73]
3 years ago
9

The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced

it is going to break far out of that range in the next 3 months. You do not know whether it will go up or down, however. The current price of the stock is $120 per share, and the price of a 3-month call option at an exercise price of $120 is $8.89. a. If the risk-free interest rate is 8% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $120? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. A straddle would be a simple options strategy to exploit your conviction about the stock price’s future movements. How far would it have to move in either direction for you to make a profit on your initial investment? (Round your intermediate calculations and final answer to 2 decimal places.)
Business
1 answer:
mariarad [96]3 years ago
3 0

Answer:

A) according to put call parity:

price of put option = call option - stock price + [future value / (1 + risk free rate)ⁿ]

put = $8.89 - $120 + [$120 / (1 + 8%)¹/⁴] = $8.89 - $120 +$117.71 = $6.60

B) you have to purchase both a put and call option ⇒ straddle

the total cost of the investment = $8.89 + $6.60 = $15.496, this way you can make a profit if the stock price increases higher than $120 + $6.60 = $126.60 or decreases below than $120 - $6.60 = $113.40

You might be interested in
Can a naturalized citizen of the United States—that is, someone who was not born in the US, but who successfully has applied for
Delicious77 [7]
B. is the correct answer
5 0
3 years ago
Melissa pellerano does consulting for the yellow pages. Her clients want to know how much of an increase in customers' awareness
tankabanditka [31]

Melissa must conduct<u> "causal research".</u>


Causal research falls under the class of conclusive research, as a result of its endeavor to uncover a circumstances and end results connection between two factors. Like descriptive research, this type of research endeavors to demonstrate a thought set forward by an individual or association. Be that as it may, it essentially varies on the two its techniques and its motivation. Where descriptive research is expansive in degree, endeavoring to more readily characterize any feeling, demeanor, or conduct held by a specific gathering.

6 0
3 years ago
The nurse educator asks a student to list the 5 main categories of complementary and alternative medicine (CAM), developed by th
kifflom [539]

Answer:

Explained below.

Explanation:

A nurse educator questions to a student, to list the 5 main categories of complementary and alternative medicine CAM, developed by the NCCAM. The statements which were made by the nursing student indicates a need for further teaching regarding CAM categories are as follows:

* Massage therapy as well as magnetic therapy are a focus of CAM.

* Massage therapy, as well as magnetic therapy, are therapies within particular categories of CAM.

7 0
3 years ago
Jake considers himself to be a follower of Thomas Malthus. Which of the following statements would Jake be most likely to make?
Ber [7]

Answer:

D

Explanation:

The Malthus theory states that population should be controlled because there are no enough resources to please the future needs. This is how it works: in the short-run there is a change in technology that leads to an increase in income. Because people have more income, better life standards, the birth rate increases and exceeds the death rate. In the long-run total income would have to be distributed between more people than before and the economy reaches the equilibrium again, in which the birth rate equals the death rate.

In other words, econmic success becomes a reproductive success.

3 0
3 years ago
The Constitution sets forth specific powers that can be exercised by the federal government and provides that the federal govern
geniusboy [140]

Answer:

states.

Explanation:

The US Constitution delegated specific powers to the three branches of the Federal government (Executive, Legislative and Judicial). All the powers not specifically delegated to any branch of the Federal government, are expressly reserved to the State governments.

The idea is very simple, all the powers not specifically granted to the federal government belong to the states.

7 0
3 years ago
Other questions:
  • If you earned $10-an-hour in 2005 when the cpi was 100, and you earn $11-an-hour today when the cpi is 120, then your real wage
    10·1 answer
  • Zoe Corporation has the following information for the month of March: Cost of direct materials used in production$17,811 Direct
    8·1 answer
  • Generally, the ________ sample procedure for inferences about two population means provides better precision than the _______ sa
    14·1 answer
  • Transactions involving items produced in the past, such as the sale of a 5-year-old automobile by a used car dealership or the p
    7·1 answer
  • First Link Services granted 20 million of its $1 par common shares to executives, subject to forfeiture if employment is termina
    10·1 answer
  • Matching Exercise: Match the type of bond to its definition. a)The Catastrophe Bond: b)A Warrant Bond: c)An Income bond: d)A Con
    6·1 answer
  • Suppose that the labor market for life guards is initially in equilibrium. Then swimming pool owners adopt a new labor-saving te
    10·1 answer
  • Explain why full employment may be inconsistent with no shirking. Shirking may be likely with full employment because A. it may
    7·1 answer
  • Brian owns a parcel of land that is encumbered by a mortgage held by the First International Bank. Brian agrees to sell the land
    15·1 answer
  • Coworker: "I have a customer who is very taciturn."
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!