Calls			Puts
Strike	Nov	Dec	Jan	Nov	Dec	Jan
105	8.40	10	11.50	5.30	1.30	2.00
110	4.40	7.10	8.30	0.90	2.50	3.80
115	1.50	3.90	5.30	2.80	4.80	4.80

The stock price was 113.25. The risk-free rates were 7.30 percent (November), 7.50 percent (December) and 7.62 percent (January). The times to expiration were 0.0384 (November), 0.1342 (December), and 0.211 (January). Assume no dividends unless indicated.

19. Suppose you knew that the January 115 options were correctly priced but suspected that the stock was mispriced. Using put-call parity, what would you expect the stock price to be? For this problem, treat the options as if they were European.

a. 113.73 =

b. 123.23

c. 121.23

d. 112.77

e. none of the above

20. Suppose the stock is about to go ex-dividend in one day. The dividend will be $4.00. Which of the following calls will you consider for exercise?

a. November 115 1.5; IV= Max(0,113.25-115) = 0

b. November 110 4.4; IV= Max(0,113.25-110) =3.25

c. December 115 3.9; IV= Max(0,113.25-115) = 0

d. all of the above

e. none of the above