Question
please solve question 7 it's a 3 part question and I'm stuck on question 7 Q5: Use the following information to answer the next three
Q5: Use the following information to answer the next three questions. The common stock of Williams Inc. has been trading in a narrow price range for the past few months, but you are convinced it will break out of its narrow range over the next 6 months. The current price of the stock is $25 per share, and the price of a 6-month call option with an exercise price of $30 is $1.15. You expect the stock to pay a $4 dividend over the course of the next 6 months. If the risk-free interest rate is 3% per year, what must be the price of a 6-month put option on Williams stock at an exercise price of $30?
A. 9.65 (correct answer)
B.5.43
C.7.35
D.5.71
Q6: Suppose that put-call parity holds and you decide to create a straddle position using options on Williams stock. What is the total upfront cost of your position? (Do not enter a dollar sign when inputting your answer)
10.8 (answer)
Q7: Assuming put-call parity holds, what is your profit/loss from your straddle position if Williams stock sells for $31 when the options expire?
A.-980
B. 980
C.950
D. -950
Q3: The value of a put option is positively related to the risk free rate. True or False
Q11: The value of a call option is positively related to changes in the price of the underlying asset. True or False
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