It is Election day, 11.03.2020 and the markets have just closed. CAT has just closed for the day up by $4.42 to a closing price of $167.69 per share which is close to a two-year high for CAT. Your mom is happy since she is a retired engineer from CAT and lots of her wealth is invested in CAT stock. She always believed in the Company, and probably didnt diversify enough. She feels that CATs $4.12 annual dividend (quarterly payment of $1.03) is secure and unlikely to be cut. She always enjoyed the steady, predictable cash from her dividends. Mom needs to make a large payment to Masonic-Care, a non-profit assisted living facility, where she is moving on June 1, 2021. There were lots of financial options for this nursing/assisted-living facility, but one of them was life tenancy where you give them an upfront payment of $250,000 and they cover room and board for the rest of your life. Your mom had planned on selling a bunch of CAT stock to raise this $250,000 at that time. She asks you what she can do to lock-in her stock at the current price so that she does not get crushed if CAT falls in the next 7 months. She knows that one way, and the easiest, is to just sell the stock now and park the money in the bank until June. The problem is that this will trigger a huge Capital gains tax this year (2020). If she sells next year (in 2021), she will be able to offset that gain with her forthcoming huge medical expenses, and thereby, effectively not have to pay again on the sale. [For the tax freaks in the Class, I am ignoring Alt Min Taxes for this discussion]. So instead of selling and getting a large tax bill, she has heard that there are other ways and asks you your advice as to alternative. You think about whether Options might help here.

Yahoo data that CAT has the current Dividend (and ex-Dividend) dates of 11.20.2020 and 10.22.2020, respectively. You know that dividends are on a 3-month cycle for CAT: - Schedule of Dividend dates: 11.20.2020, 02.19.2021, 05.21.2021 and 08.20.2021 - Schedule of Ex-Dividend dates: 10.22.2020, 01.21.2021, 04.22.2021 and 07.22.2021 the dataset are two pages (each) for Options with Exercise Dates of 01.15.2021, 05.21.2021 & 06.18.2021.

1. Lets use the Options Data and the for the Jan 15 th expiration options, $160 for the Bond Price and for the Exercise (Strike) Price of both the Call and the Put. Ignoring dividends, how accurate is the Put-Call-Parity Theorem? In other words, how close does (Stock + Put) = (Bond + Call) ?? Continuing to ignore dividends, how about if we assume $175 was the price (maturity value) for the Bond and the exercise price of both the Put and Call (still using Data for 01.15.2021)? Now, how about if we consider dividends and are answering the question for the $160 level and for 01.15.2021? Now go to the options expiring 06.18.2021 and look at the Bond Price (and exercise price) at $160 again. If we ignore dividends, is it consistent with your earlier conclusions for the analysis at $160 using the Jan exercise date? How about if we consider dividends?