..ooo Verizon 7:10 PM una.instructure.com 1396 [D Question3 You wish to purchase a European call option with expiration in one year and strike price $6,840. The underlier is 100 shares with current price $67.90. The annual effective interest rate is 4.2%. The price of the European put option (same expiration and strike price) is $32.17. How much should you expect to pay for the call option, assuming that pricing is by a no- arbitrage model? UNA Question 4 A stock sells for $23.80 per share. Three months from now, the price will either be $25.20 or $22.20. A call option to purchase 100 shares in three months for $24 sells for $72. With what risk-free annual effective rate of interest is this consistent (assuming no-arbitrage model)? Question5 The current price of a stock is $47.20. One month from now, the price will either be $48 or $46.50. The nominal risk-free interest rate is 3% convertible monthly. In order that there not be an arbitrage opportunity, what should the price of the European put option for 100 shares of this stock, if it allows the holder to purchase the stock for $47 per share in one month? Question 6 A European call option has strike price $20,000 and exercise in three years. The current price of the underlier is $18,400 and will either go up by 10% or down 8% each year (independent of what happens in the other years). Find the no-arbitrage price of the option, if the annual effective risk-free effective interest rate is 4%. Search entries or author Unread Subscribe