Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1.Consider call and put options on a non-dividend paying stock. The price of a call option with a strike price of $30 and 6 months

1.Consider call and put options on a non-dividend paying stock. The price of a call option with a strike price of $30 and 6 months to maturity is $1.75. If the current stock price is $29.8 and the interest rate is 10% per annum continuously compounded, what is the price of the put option with the same strike price and maturity?

A.$1.32

B.$1.18

C.$0.96

D.$0.72

E.$0.48

2.Consider the above but with the only change that the stock would pay a dividend of $1 after 3 months. If the price of the call option is $1.75, what is the price of the put option?

A.$2.27

B.$2.13

C.$1.98

D.$1.72

E.$1.46

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Mathematics

Authors: Gary Clendenen, Stanley A Salzman, Charles D Miller

12th Edition

0135109787, 9780135109786

More Books

Students also viewed these Finance questions