1. IBM stock currently sells for 44 dollars per share. The implied volatility equals 45.0 percent. The risk-free rate of interest is 7.0 percent continuously compounded. If you owned 100 shares of IBM stock with strike price 45 and maturity of 5 months, how many call options would you have to buy (sell) to create a delta-neutral hedge? Assume each option controls one share of IBM stock.
176.21
588.24
17.0
56.749
2. Which one of the following statements is false?
Poison pills encourages current owners to purchase more stock in the company.
Poison pills discourage potential high takeover bids.
Stockholders have to approve the acceptance of poison pill strategies before a corporation can use them.
Many institutional investors are opposed to the poison pill.