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larisa [96]
4 years ago
15

Show that Black-Scholes call option hedge ratios also increase as the stock price increases. Consider a 1-year option with exerc

ise price $50, on a stock with annual standard deviation 20%. The T-bill rate is 3% per year. Find N(d1) for stock prices $45, $50, and $55.
Business
1 answer:
Ivan4 years ago
6 0

Answer:

Check explanation.

Explanation:

A call option hedge ratio shows how an option price with respect to price changes in the underlying stock. A call option hedge ratio is used in determining the number of shares of stocks to hedge an option position.

We have Call option with the following characteristics:

X = 50; T=1 year; standard deviation = 20%; T-bill rate = 3%.

Hedge ratio = N(d1) from the Black-Scholes equation

For S=$45, d1 = -0.0268 and N(d1) =0.489309.

For S = $50, d1 = 0.5 and N(d1) = 0.6915.

If S = $55, d1 = 0.97655 and N(d1) = 0.8356.

From the above values obtained, it means that the price of the call option becomes more sensitive to changes in the price of the stock at higher stock prices.

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Managers use _____ to direct employees and resources toward achieving specific outcomes that enable the organization to perform
Phoenix [80]

Answer:

Operational goals

Explanation:

The operational goals are the goals that refer to the day to day targets so that the daily requirement of the company would be fulfilled that would result to fulfill the larger requirement at a later time as if the daily targets are fulfilled so the chance of fulfilling the larger task is high

To fulfill the daily task, the efficiency and effectiveness of the employees is equally important that could help the organization to achieves its desired targets and the objectives

8 0
3 years ago
The market price of apples is currently rising. in a free-market economy, which is the most likely explanation of this price cha
lana66690 [7]
A free market economy is one in which economic decisions and price of goods and services are guided solely by the aggregate interactions of a country's  individual citizen and businesses, with little intervention from the government. If the market price of apple increases in such an economy, it means that there is a shortage in the market for apples.
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3 years ago
Phil, a management trainer at Flint Inc., designs a training program that focuses on capturing insights and information from kno
Likurg_2 [28]

Answer:

The correct answer is letter "C": Enhance innovation and creativity.

Explanation:

Phil is enhancing innovation and creativity by introducing his new management assessment. Those assessments are typically directed to executives and how they should use their resources to drive companies to success. However, Phil is promoting the idea of obtaining valuable information from knowledgeable employees of the entity that could help managers to make better decisions.

4 0
3 years ago
You sell Apples and Banana. You are considering selling them together and separately. You have three types of buyers, Banana lov
Natasha2012 [34]

Answer:

Apples and Banana

a) Profit maximizing prices:

i) For Apple = $100

ii) For Banana = $40

b) Profits equal revenue minus costs:

i) For Apple = $100Q - (20 + 10Q) = $60Q

ii) For Banana = $40 - (26.5 + 5Q) = $8.50Q

c) To maximize profit, the price to charge is $100 for Apples and $40 for Banana.

d) I would expect to earn a profit of  $68.50 for a set of apple and banana.

Explanation:

To maximize profit, Apple and Banana will be sold separately.

But, selling them together, the best profit maximizing prices will be $100 for Apples and $10 for Banana.

At this combined price, the banana still makes a contribution of $5 per unit towards offsetting the fixed cost of $26.50

7 0
4 years ago
A typical mortgage term is:<br> A. 5 years<br> B. 72 months<br> C. 3 years<br> D. 20 years
svet-max [94.6K]
A typical mortgage term is 20 years.
7 0
4 years ago
Read 2 more answers
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