Question
A. The price of a non-dividend paying stock is $19 and the price of a three-month European call option on the stock with a strike
A. The price of a non-dividend paying stock is $19 and the price of a three-month European call option on the stock with a strike price of $20 is $1. The risk-free interest rate is 4% per annum. What is the price of a three-month European put option with a strike price of $20? Is there an arbitrage opportunity when the put option price is $3?
B. The price of a non-dividend paying stock is $19 and the price of a three-month European call option on the stock with a strike price of $20 is $2. The risk-free interest rate is 4% per annum. What is the price of a three-month European put option with a strike price of $20? Is there an arbitrage opportunity when the put option price is $1?
Can you please provide an explanation and formulas used? thank you
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Technical Analysis Of Stock Trends
Authors: Robert D. Edwards, John Magee
5th Edition
0910944008, 978-0910944007
