Solved by a verified expert :17. From the previous two questions, can you derive the relationship
between the betas of call, put, and stock?
18.
(Cash-or-Nothing Option) What is the value of an option that pays
$100 if the stock price exceeds a prespeci ed strike at maturity? Assume that
the initial stock price is $100, maturity is one year, volatility is 50%, and
the strike is $110. Assume also that the risk-free rate of interest is zero.
19. (Corridor Options) What is the price of an option that has a
maturity of 60 days and pays $1 for each day that the stock price lies in the
range (50,60)? The current stock price is S = 55, volatility = 0:4, interest
rate r = 0:03, and dividends d = 0.
20.
(Extension of Previous Question)
Consider an option that is the same as the above except that the option pays o
$1 for each day only when the stock is outside the range (50,60). What is the
price of this option?
21.
Which is higher, the expected
return on a stock or that of a call option on a stock? Assume the CAPM model
governs returns in the real world.
