Consider an American put option on XAL stock with a strike price of ($49) and one year
Question:
Consider an American put option on XAL stock with a strike price of \($49\) and one year to expiration. Assume XAL pays no dividends, XAL is currently trading for \($5\) per share, and the one-year interest rate is 10%. If it is optimal to exercise this option early:
a. What is the price of a one-year American put option on XAL stock with a strike price of
\($58\) per share?
b. What is the maximum price of a one-year American call option on XAL stock with a strike price of \($49\) per share?
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Step by Step Answer:
To calculate the price of a oneyear American put option and the maximum price of a oneyear American call option we will use the putcall parity relatio...View the full answer
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