Question
A European option to sell PBA Ltd shares for $8.50 in exactly three months is priced at 10c.The next dividend of 50c will be paid
A European option to sell PBA Ltd shares for $8.50 in exactly three months is priced at 10c.The next dividend of 50c will be paid in six months, and PBA's shares are currently trading for $8.70.
i)If interest rates are 10% p.a. compounded quarterly, what is the no-arbitrage price of an option to buy PBA's shares for $8.50 in three months?
ii)What profit would be made if a put option was purchased at current prices and shares were priced at $8.15 in exactly three months' time?
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Succeeding in Business with Microsoft Excel 2013 A Problem Solving Approach
Authors: Debra Gross, Frank Akaiwa, Karleen Nordquist
1st edition
978-1285099149, 9781285963969, 1285099141, 1285963962, 978-1285715346
