Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider a put option written on some company's stock. Its expiration is in six months. Its exercise price is $45. This put option is currently

Consider a put option written on some company's stock. Its expiration is in six months. Its exercise price is $45. This put option is currently worth $4.80. The underlying asset, i.e., the shares of stock of this company, can be purchased today for $41 a share. The Treasury bill rate, i.e., risk-free rate, is 3.3 percent per year, compounded continuously.

A call option with the same exercise price and the same expiration date as the put option, should cost _____ in today's market. (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

call price: ?

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

Foundations Of Business Finance

Authors: Peyton Foster Roden

2nd Edition

0873932420, 9780873932424

More Books

Students also viewed these Finance questions