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Corporate Finance · End Term · 10 May 2026 · January 2026 term · Set 1

Question 28: The current price of a non-dividend-paying stock is Rs 6…

Question 28

+4 marksNumerical answer

The current price of a non-dividend-paying stock is Rs 60. Over the next six months, it is expected to rise to Rs 75 or fall to Rs 50. Assume the risk-free rate is zero. A six-month call option with a strike price of Rs 70 is trading at Rs 3. How many options are required to hedge the purchase of 50 stocks? (Round off to the nearest integer)

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Correct answer: 250 (accepted within ±5)

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Question 28 of 35 in the IIT Madras BS Corporate Finance (Corporate Finance) End Term paper sat on 10 May 2026, in the January 2026 term (Corporate Finance 06 May 26). It carries 4 marks.

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