Chat with us, powered by LiveChat

When a company announces a dividend, the price of the stock drops by the amount of the dividend. What will happen to the price of the option?

Words: 227
Pages: 1
Subject: Finance

1- For the following bonds, and given the yield curve, choose a bond which give you a positive change in price, then calculate the change in price for each bond.
Data will be provided.

2- Calculate the price of a call and a put option with exercise price $10 and 26 weeks to maturity by using Black Scholes. The initial price of the stock is $13. The risk free rate is 2.43% per year and the standard deviation of stock returns is 12% per year3- There are 2 myths floating around in the financial industry. The first is that when investors are scared due to a loss of value in the SP 500, they rush to buy gold. The second is that when investors are uncertain on what the future will bring, the value of the SP 500 drops. Use the data in the file “gold 2” to test whether these myths are correct or not. Use your imagination and knowledge to decide how to test these two myths.

Easy questions: ~50 words each question

a. When a company announces a dividend, the price of the stock drops by the amount of the dividend. What will happen to the price of the option?

b. A couple of years ago, the Fed announced an increase in interest rates via bond issuance, some traders rushed to buy call options before the news were priced. Why that would be?