1) Two months ago, you sold a call option on Apple stock with a strike price of $149, which expires today. What is the payoff if the stock price is $159 today? a) $20 b) $10 c) $0 d) $-10 e) $-20 f)...

the assignment is in the attached document. Please solve it correctly this time.


1) Two months ago, you sold a call option on Apple stock with a strike price of $149, which expires today. What is the payoff if the stock price is $159 today? a) $20 b) $10 c) $0 d) $-10 e) $-20 f) Other, specify. 2) For European options, some prefer the Riviera and some prefer the Baltic, while few go for the excitement of a Black sea vacation. But more generally, assuming the strike price and expiration dates are the same, the value of a European call minus the value of a European put is equal to: a) Zero, they cancel out. b) The present value of the exercise price minus the value of a share. c) The present value of the exercise price plus the value of a share. d) The value of a share plus the present value of the exercise price. e) The value of a share minus the present value of the exercise price. f) Other, specify. 3) For American options, there is Yellowstone, or the Grand Canyon, and a few will venture into Death Valley for a vacation. But more generally, assuming the strike price and expiration dates are the same, the value of an American call minus the value of an American put is equal to: a) Zero, they cancel out. b) The present value of the exercise price minus the value of a share. c) The present value of the exercise price plus the value of a share. d) The value of a share plus the present value of the exercise price. e) The value of a share minus the present value of the exercise price. f) Other, specify. 4) Employee stock options (ESOs) have been compared to regular stock call options (SO). Among the similarities are (chose one): a) ESOs and SOs can be bought and sold. b) ESOs and SOs can be calls or puts. c) ESOs and SOs rise in value when volatility increases. d) ESOs and SOs typically expire in a few years or less. e) ESOs and SOs typically vest in a few days to weeks. f) Other Specify. Algebraic Problem (3 points - Address all questions, show your work) 5) XYZ Stock is binomially distributed. For each period, it will either go up 10%, or down 20%. The risk free rate is 5%. There are no dividends. Currently, (at period 1) the stock sells for $100/share. There is a call option with strike price $90 that expires at period 3. a) What is the risk neutral probability that the stock price will go up? b) Diagram the possibilities for the stock price over periods 1, 2 and 3. c) For each possible price at periods 2 and 3, show what the option would be worth. d) What is the option delta or hedge ratio at period 1? e) What should the option be worth at period 1?