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In each of the questions below the first option is priced correctly. Indicate how the second option should be priced in relation to the
In each of the questions below the first option is priced correctly. Indicate how the second option should be priced in relation to the first call. Question la Price Expiry Exercise Stock Beta of Standard (Months) Price Price Stock Deviation GHK $8 9 Call $30 $35 1.6 20% LMN $10 9 $30 Call $35 1.5 25% The LMN call is consistently priced in relation to the GHK call. Appraise whether the statement regarding the pricing of the LMN call is true, false, or cannot be decided, and give reasons for your choice. (8 marks) Question 1b Price Expiry (Months) Exercise Price Stock Price OPQ Call $2 3 $10 $10 OPQ Put $7 6 $15 $10 The OPQ put is consistently priced in relation to the OPQ call. Appraise whether the statement regarding the pricing of the OPQ put is true, false, or cannot be decided, and give reasons for your choice. (10 marks)
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