Project #9000 - Financial Engineering

Assignment Type: Individual Project   Deliverable Length: 600-800 words   
Points Possible: 150   Due Date: 7/7/2013 11:59:59 PM  CT   

Using the Website http://www.option-price.com/index.php, determine the appropriate value or price of an option under the following conditions (use “3” the “rounding” parameter”):

  • Exercise price $90
  • Underlying stock price $90
  • Time between option expiration and today 30 days
  • Standard deviation of stocks returns 10%
  • Marketplace interest rates or avg. rate of return 8%
  • Dividend yield 5%

How would the price of this option change if the expiration date were 85 days from now, vs. 30 days?

Why does this difference (between 1 and 2) make sense?

Make up an example of a company in an industry and the conditions in the marketplace which might cause you to buy a “put option” for company A, in industry B stock…vs. a “call option” on some other company X in industry Y.

Please submit your assignment.

For assistance with your assignment, please use your text, Web resources, and all course materials.

Unit Materials

Subject Business
Due By (Pacific Time) 07/14/2013 10:00 am
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