### Financial Derivatives Financial Derivitives A Term Paper

Length: 3 pages Subject: Economics Type: Term Paper Paper: #34937202 Related Topics: General Motors, Stock, Acceptance, Stocks And Bonds
##### Excerpt from Term Paper :

The Black-Scholes-Merton model assumes (circle one)

The return from the stock in a short period of time is lognormal

The stock price at a future time is lognormal

The stock price at a future time is normal

None of the above

11. Volatility can be defined as (circle one)

The standard deviation of the return, measured with continuous compounding, in one year

The variance of the return, measured with continuous compounding, in one year

The standard deviation of the stock price in one year

12. A stock price is \$100. Volatility is estimated to be 20% per year. What is the an estimate of the standard deviation of the change in the stock price in one week (circle one)

\$0.38

\$2.77

\$3.02

\$0.76

13. To create a range forward contract in order to hedge foreign currency that will be paid a company should (Circle one)

Buy a put and sell a call on the currency with the strike price of the put higher than that of the call

Buy a put and sell a call on the currency with the strike price of the put lower than that of the call

Buy a call and sell a put on the currency with the strike price of the put higher than that of the call

Buy a call and sell a put on the currency with the strike price of the put lower than that of the call

14. Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of \$1,000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%.

a. What was the price of this bond when it was issued? \$1,000.

b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?1000.

...

Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment? \$930.

15. What is the price of a five-year, zero-coupon, default-free security of 4.8% with a face value of \$1,000? \$48.

16. Draw the diagram that tells you if you buy a Bond what its relationship is to Call Yield, Yield to Maturity, and Yield to a Call. A bond can be "recalled" at its maturity date if the percentage rate has gone down because it can be refinanced at a lower cost, if the percentage rate has gone up, you would do nothing because it is now a better deal. Yield to Maturity is the rate of return expected if the bond is held until maturity. Yield to a Call is when you redeem the bond at the callable date, which is before maturity.

17. Using a binomial tree, what is the price of a \$40 strike 6-month call option, using 3-month intervals as the time period? Assume the following data: S = \$37.90, r = 5.0%, ? = 0.35

2.50

2.76

2.92

3.08

18. Compute ? For the following call option. The stock is selling for \$23.50. The strike price is \$25. The possible stock prices at the end of 6 months are \$27.25 and \$21.75.

A) 0.4091

B) 0.6822

C) 0.8433

D) 0.9216

19. Using a binomial tree, what is the price of a \$40 strike 6-month put option, using 3-month intervals as the time period? Assume the following data: S = \$37.90, r = 5.0%, ? = 0.35

A) \$3.52

B) \$3.66

C) \$3.84

D) \$3.91

20. What is the delta on a \$25 strike put? Assume S = \$24.00, ? = 0.35, r = 0.06, the stock pays a 2.0% continuous dividend and the option expires in 40 days?

A) 0.582

B) 0.602

C) 0.662

D) 0.702 although when I put this data into a calculator online, I came up with 0.9984 as the answer.

21. Assume S = \$33.00, ? = 0.32, r = 0.06, div = 0.01. You short 100 \$35 strike calls at 68 days until expiration. Under a delta hedge position, what is your overnight profit/loss if the stock rises to \$34.50?

A) \$9.23 loss

B) \$9.23 gain

C) \$7.62 loss

D) \$7.62 gain

22. A European call option on…

###### Cite this Document:

"Financial Derivatives Financial Derivitives A" (2011, June 13) Retrieved June 17, 2021, from
https://www.paperdue.com/essay/financial-derivatives-financial-derivitives-42485

"Financial Derivatives Financial Derivitives A" 13 June 2011. Web.17 June. 2021. <
https://www.paperdue.com/essay/financial-derivatives-financial-derivitives-42485>

"Financial Derivatives Financial Derivitives A", 13 June 2011, Accessed.17 June. 2021,
https://www.paperdue.com/essay/financial-derivatives-financial-derivitives-42485

##### Bear Globally, There Are Eight Bear Species
Words: 1190 Length: 3 Pages Topic: Animals Paper #: 35586999

Bear Globally, there are eight bear species in the Family Ursidae (Order Carnivora), three of which are found in Canada: The Black bear, the brown bear and the polar bear. Black bear still occupy 85% of their historic Canadian range and 62% of the original North American range (Kolenosky and Strathearn 1987, Pelton 2000). In North America, black bears evolved as forest dwellers and most populations are currently stable or increasing (Brown,

##### Bear Sterns Collapse, How It
Words: 656 Length: 2 Pages Topic: Economics Paper #: 65555950

On March 14, 2008, Bear's stock dropped nearly 40% in the first half-hour of trading, effectively tolling the death-knell of Bear's existence as an independent entity (Boyd 2008). Only a temporary loan from J.P. Morgan Chase and the Federal Reserve Bank of New York prevented Bear from going bankrupt immediately. Who was affected and what happened in the markets Both investors and employees were affected: "I worked eight years at a

##### Bear the True Meaning of
Words: 1268 Length: 4 Pages Topic: Mythology Paper #: 54016563

Then they would break camp and go home," (217). When Old Ben was finally taken down, the hunters who had spent so long in pursuing him then had nothing left to contribute to their legend. Their purpose was completed, much like the South's long-gone glory days. Most of those who made up their party had little other talents than to track and hunt. The stray Mastiff, Lion, who "inferred not

##### Bear Witness Will Bear Witness
Words: 1609 Length: 5 Pages Topic: Drama - World Paper #: 67605677

" July, 1941 (p423) It is easy to see, even with the examples given from 1933-1941, the progression of the use of deleterious language, slang, phrases, descriptive terms, and the increased use of various media to project it. Klemperer asks himself why so many decent people he knew would all remark of Hitler: "You can't resist him." His conclusion is that National Socialism was a religion and its publicly staged spectacles, with

##### Polar Bear Habitat Powerful Yet Fragile; These
Words: 1481 Length: 4 Pages Topic: Weather Paper #: 69312830

Polar Bear Habitat Powerful yet fragile; these words best describe the polar bear and the habitat where the bears reside. The polar bear is an animal of supreme beauty and power. Polar bears can kill swiftly with one powerful strike from their expansive paws. The inviting cuddly image of the polar bear hides the quiet power, of a fierce predator. Polar bears may be lost to the world forever if the

##### Teddy Bear Film Analysis Pitch
Words: 1748 Length: 5 Pages Topic: Urban Studies Paper #: 11131566

One of the eyes is cracked. The last room Karen checks is the kitchen. She is still holding and petting the teddy bear when she stops in front of the sink. She stares at the spot on the counter where the teddy bear had landed that time that Mark threw it across the room. The camera is behind Karen but as she turns around, it focuses on the back of