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Corporate Finance · End Term · 22 Dec 2024 · September 2024 term · Set QDB1

Question 31: The current price of a non-dividend-paying stock is Rs 5…

Question 31

+4 marksNumerical answer

The current price of a non-dividend-paying stock is Rs 50. Over the next six months, it is expected to rise to Rs 65 or fall to Rs 45. Assume the risk-free rate is zero. A six-month call option with a strike price of Rs 55 is trading at Rs 5. How many options are required to hedge the purchase of 2 shares of the stock?
**Note:**The answer is a single digit integer between 0-9.

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Correct answer: 4

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Question 31 of 35 in the IIT Madras BS Corporate Finance (Corporate Finance) End Term paper sat on 22 Dec 2024, in the September 2024 term (IIT M DEGREE AN EXAM QDB3 22 Dec 2024). It carries 4 marks.

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