14. A call option has a premium of $0.60, a strike price of $40, and 3...

Question

Question

business finance

Answer 1

Answer #1

Using put call parity
P=C+X/(1+r)^t-S+D/(1+r)^t'=0.60+40/(1+3%)^(3/12)-39.60+0.80/(1+3%)^(2/12)=1.50157

Answer 2

Similar Homework Help Questions

A call option has a premium of $0.60, a strike price of $40, and 3 months...

A call option has a premium of $0.60, a strike price of $40, and 3 months to expiration. The current stock price is $39.60. The stock will pay a $0.80 dividend two months from now. The risk-free rate is 3 percent. What is the premium on a 3-month put with a strike price of $40? Assume the options are European style.
(i) The current stock price is 100. The call option premium with a strike price 100...

(i) The current stock price is 100. The call option premium with a strike price 100 is 8. The effective risk-free interest rate is 2%. The stock pays no dividend. What is the price of a put option with strike price 100? (Both options mature in 3 months.) (ii) The 3-month forward price is 50. The put option premium with a strike price 52 is 3 and the put option matures in 3 months. The risk-free interest rate is 4%...
The current stock price is 100. The call option premium with a strike price 100 is...

The current stock price is 100. The call option premium with a strike price 100 is 8. The effective risk-free interest rate is 2%. The stock pays no dividend. What is the price of a put option with strike price 100? (Both options mature in 3 months.)

A European call option and put option on a stock both have a strike price of...

A European call option and put option on a stock both have a strike price of $25 and an expiration date in six months. Both sell for $3. The risk-free interest rate is 10% per annum, the current stock price is $23, and a $1 per share dividend is expected in 2 months. Identify the arbitrage opportunity open to a trader.
The 3-month forward price is 50. The put option premium with a strike price 52 is...

The 3-month forward price is 50. The put option premium with a strike price 52 is 3 and the put option matures in 3 months. The risk-free interest rate is 4% p.a., compounded quarterly. The stock pays no dividend. What is the price of a call option with a strike of 52 and matures in 3 months?
A European call option and put option on a stock both have a strike price of...

A European call option and put option on a stock both have a strike price of $45 and an expiration date in six months. Both sell for $2. The risk-free interest rate is 5% p.a. The current stock price is $43. There is no dividend expected for the next six months. a) If the stock price in three months is $48, which option is in the money and which one is out of the money? b) As an arbitrageur, can...

A call option is currently selling for $5.30. It has a strike price of $60 and...

A call option is currently selling for $5.30. It has a strike price of $60 and six months to maturity. A put option with the same strike price sells for $7.80. The risk-free rate is 4.3 percent, and the stock will pay a dividend of $2.80 in three months. What is the current stock price?
A stock's current price is $72. A call option with 3-month maturity and strike price of...

A stock's current price is $72. A call option with 3-month maturity and strike price of $ 68 is trading for 6, while a put with the same strike and expiration is trading for $20. The risk free rate is 2%. How much arbitrage profit can you make by selling the put and purchasing a synthetic put? (Provide your answer rounded to two decimals.) You have purchased a put option for $ 11 three months ago. The option's strike price...
Problem 12. A European call and put option on a stock both have a strike price...

Problem 12. A European call and put option on a stock both have a strike price of $30 and an expiration date in three months. The price of the call is $3, and the price of the put is $2.25. The risk free interest rate is 10% per annum, the current stock price is $31. Indentify the arbitrage opportunity open to a trader.

The price of a European call that expires in nine months and has a strike price...

The price of a European call that expires in nine months and has a strike price of $40 is $6.80. The underlying stock price is $41, and a dividend of $1.50 is expected in four months. The term structure is flat, with all risk-free interest rates being 10%. a. What is the price of a European put option on the same stock that expires in nine months and has a strike price of $40? b. Explain in detail the arbitrage...