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# stock price

a.    What is the probability that a European call option on the stock with an exercise price of \$40 and a maturity date in six months will be exercised?
b.    What is the probability that a European put option on the stock with the same exercise price and maturity will be exercised?
13.13. What is the price of a European call option on a non-dividend-paying stock when the stock price is \$52, the strike price is \$50, the risk-free interest rate is 12% per annum, the volatility is 30% per annum, and the time to maturity is three months?
13.14. What is the price of a European put option on a non-dividend-paying stock when the stock price is \$69, the strike price is \$70, the risk-free interest rate is 5% per annum, the volatility is 35% per annum, and the time to maturity is six months?
13.22. If the volatility of a stock is 18% per annum, estimate the standard deviation of the percentage price change in (a) one day, (b) one week, and (c) one month.
13.24. Suppose that observations on a stock price (in dollars) at the end of each of 15 consecutive weeks are as follows:
30.2, 32.0, 31.1, 30.1, 30.2, 30.3, 30.6, 33.0, 32.9, 33.0, 33.5, 33.5, 33.7, 33.5, 33.2
Estimate the stock price volatility. What is the standard error of your estimate?

13.26. Consider an option on a non-dividend-paying stock when the stock price is \$30, the exercise price is \$29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months.
a.    What is the price of the option if it is a European call?
b.    What is the price of the option if it is an American call?
c.    What is the price of the option if it is a European put?
d.    Verify that put-call parity holds.
15.4. A currency is currently worth \$0.80. Over each of the next two months it is expected to increase or decrease in value by 2%. The domestic and foreign risk-free interest rates are 6% and 8%, respectively. What is the value of a two-month European call option with a strike price of \$0.80?
15.7. Calculate the value of an eight-month European put option on a currency with a strike price of 0.50. The current exchange rate is 0.52, the volatility of the exchange rate is 12%, the domestic risk-free interest rate is 4% per annum, and the foreign risk-free interest rate is 8% per annum
15.10. Consider a stock index currently standing at 250. The dividend yield on the index is 4% per annum, and the risk-free rate is 6% per annum. A three-month European call option on the index with a strike price of 245 is currently worth \$10. What is the value of a three-month put option on the index with a strike price of 245?

## Price: £ 99

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