Answer Happy

1. Stock ABC is currently trading at $52.84 per share. We are looking at 1-year options with a strike price of $48.00. If the volatility is 24%, and the risk-free rate is 3.00%, according to Black- Scholes: a) What should the call price be? b) What should the put price be? c) What is the hedge ratio? d) Approximately, how many short calls would hedge 100 shares of stock (round to nearest whole number)? 2. If you are long a stock but are concerned it might drop in value, what is your best option strategy? 3. If you own shares of a stock in a company that makes fighter jets. The company has put out a bid for a government contract. You believe they are 70% likely to get the bid, but if they don't get the bid, the stock's price will drop significantly. What is the best option strategy that you can use to profit if they get the bid (which is more likely) or if they lose the bid? 4. Given the following information on a DISH Network convertible bond, calculate the time to payback (or breakeven). Note: DISH stock does not pay dividends. a F4 DES DISH 3 3/8 08/15/2026 C X + GO PRINT HELP MEMC SEARCQUOT QUOT MONT NEWS MSG MENU PG BA PGFU < > DISH 3 3/8 08/15/2026 Corp DES Related Functions Menu Equity Equity I DISH 3 3/8 08/15/26 Co Actions Settings Page 1/12 Securi 94 No Notes 93 Buy 90 Sell 25) Convertible Bond 29 Underlying Description Pages Issuer Information Identifiers 10 Bond Info Name DISH NETWORK CORP FIGI BBGOODJ5T445 10 Addtl Info Industry Cable Satellite (BCLASS) CUSIP 13 Reg/Tax 25470MAB5 14 Covenants Convertible Information ISIN US25470MAB54 19 Guarantors Mkt of Issue US DOMEST...Convertible Bond Ratings 14 Bond Ratings Ctry/Reg US Currency USD Moody's B2 17) Identifiers Rank Sr Unsecured Series S&P ССС 19 Exchanges Conv Ratio 15.3429 Conv Price 65.1767 19 Inv Parties Composite ССС, 20 Fees, Restrict Stock Tkr DISH US Stock Price 21.299999 20 schedules Parity 32.6804 Premium 140.6123 Issuance & Trading 23 Coupons Coupon 3.375000 Init Prem 32.500 Amt Issued/Outstanding Quick Links Type Fixed Freq S/A USD 3,000,000.00 (M) / 32 ALLQ Pricing USD 3,000,000.00 (M) 33 QRD Qt Recap Calc Type (49) CONVERTIBLE Min Piece/Increment 34 TDH Trade Hist 35 CACS Corp Action Pricing Date 08/03/2016 1,000.00/ 1,000.00 34 CF Prospectus 1st Coupon Date 02/15/2017 Par Amount 1,000.00 37 CN Sec News Convertible Until 08/13/2026 Book Runner DB-sole 39 HDS Holders Maturity 08/15/2026 Reporting TRACE