Question
Consider an American put option on XAL stock with a strike price of $32 and one year to expiration. Assume XAL pays no dividends, XAL
Consider an American put option on XAL stock with a strike price of $32 and one year to expiration. Assume XAL pays no dividends, XAL is currently trading for $4 per share, and the one-year interest rate is 9%. If it is optimal to exercise this option early:
a. What is the price of a one-year American put option on XAL stock with a strike price of $38 per share?
b. What is the maximum price of a one-year American call option on XAL stock with a strike price of $32 per share?
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Financial Econometrics
Authors: Peijie Wang
1st Edition
0415426693, 978-0415426695
