Question
For questions 5 and 6: A European call option and a put option on a stock both have a strike price of $20 and an
For questions 5 and 6: A European call option and a put option on a stock both have a strike price of $20 and an expiration date in 3 months. Both sell for $3. The risk-free rate is 10% per year, the current stock price is $19, and two dividends of $1 each, are expected in 1 month, and 4 months, respectively. What is its model (synthetic call) price?
a. $3.37
b. $2.26
c. $3
d. $1.48
for questions 5 and 6: A European call option and a put option on a stock both have a strike price of $20 and an expiration date in 3 months. Both sell for $3. The risk-free rate is 10% per year, the current stock price is $19, and two dividends of $1 each, are expected in 1 month, and 4 months, respectively.
What must an arbitrageur do?
a.do nothing
b.buy the actual call, sell the synthetic call
c. sell the actual call, buy the synthetic call
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