- The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
- Assignments submitted through email will not be accepted.
- Students are advised to make their work clear and well presented; marks may be reduced for poor presentation. This includes filling your information on the cover page.
- Students must mention question number clearly in their answer.
- Late submission will NOT be accepted.
- Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
- All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).
- Submissions without this cover page will NOT be accepted.
Assignment Questions: (Marks- 10)
Answer all the following Questions:
- Identify and briefly discuss the various types of option transaction costs? (250-300 words) 2.5 Marks
- Explain why an options time value is greatest when the stock price is near the exercise price and why it nearly disappears when the option is deep- in -or out- of -the money. (250-300 words) 2.5 Marks
- ABC Company stock currently priced at $ 80. One period later it can go up by 25% or go down by 20%. The risk-free rate is 7 percent. Calculate the current /theoretical value of the European call option if the exercise/strike price is SAR 80? (5 Marks)
Answers:
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