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In one year, you are planning to buy a 0-coupon bond maturing 5 years from today with a face value of $1000. You want to
In one year, you are planning to buy a 0-coupon bond maturing 5 years from today with a face value of $1000. You want to protect yourself against unfavorable changes in interest rates; currently, the risk-free rate is 5%, and you want to be sure that you can buy the bond next year for $800. A put option to sell such a bond in 1 year costs $2.75; what does the corresponding call option cost?
A. $15.07
B. $20.57
C. $26.07
D. $158.51
E. $193.00
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