Question
General Eclectics, Inc., has both European call and put options traded on the Chicago Board Options Exchange. Both options have the same exercise price of
General Eclectics, Inc., has both European call and put options traded on the Chicago Board Options Exchange. Both options have the same exercise price of $40 and both expire in one year. General Eclectic’s stock does not pay dividends. The call and the put are currently selling for $8 and $2, respectively. The risk-free interest rate is 10% per annum. What should the stock price of General Eclectics, Inc., be in order to prevent arbitrage?
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Fundamentals of Futures and Options Markets
Authors: John C. Hull
8th edition
978-1292155036, 1292155035, 132993341, 978-0132993340
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