Business, 20.08.2020 15:01 P05182010

Calculate the elasticity of a call option with a premium of $6.50 and a strike price of $61. The call has a hedge ratio of 0.7, and the underlying stock’s price is currently $47.

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Answer from: Cassandoo

The Elasticity of the call option = $\mathbf{ 5.06 \%}$

Explanation:

From the given information:

For $1 change in stock price

the percentage of change in stock price = ΔS/S

ΔS/S = (1× 100)/47 = 2.127659574

ΔC = hedge ratio × ΔS

ΔC = 0.7 × 1

ΔC = 0.7

However , the percentage change in the stock call option price = ΔC/C

= (0.7 × 100) / 6.50

= 70/6.50

= 10.76923077

∴

The Elasticity of the call option = $\mathbf{\dfrac{percentage \ change \ in \ the \stock \ call \ option \ price }{percentage \ change \ in \ the \ stock \ price}}$

The Elasticity of the call option = $\mathbf{ \dfrac{10.76923077 }{2.127659574}}$

The Elasticity of the call option = $\mathbf{ 5.06 \%}$

The Price Elasticity of the call option can be computed by using EXCEL FUNCTION(=B3*(B4/B1))

The illustration to that can be seen in the diagram attached below.

The Elasticity of the call option $\simeq$ 5.06% by using EXCEL FUNCTION.

Calculate the elasticity of a call option with a premium of $6.50 and a strike price of $61. The cal

Answer from: Quest

the answer choices are:

provides online banking

provides automatic payment services

provides home loans by using saving accounts

accept tax return refunds

hopefully someone can answer the question now lol

Answer from: Quest

1 all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

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Calculate the elasticity of a call option with a premium of $6.50 and a strike price of $61. The cal...