Question
Question 4 (15 marks) The Lo Lu Plcs stocks are currently trading at $215 per share. Over each of the next two six-month periods it
Question 4 (15 marks)
The Lo Lu Plcs stocks are currently trading at $215 per share. Over each of the next two six-month periods it is expected to go up by 12% or down by 8%. The risk-free interest rate is 2% per annum with continuous compounding. [note: dont have to show the binomial tree]
- What is the price of a six-month at-the- money European put option on this stock? (8 marks)
[Enter your answer here]
- What is the price of a six-month at-the money European call option on this stock? (4 marks)
[Enter your answer here]
- Verify that the European call and European put prices satisfy putcall parity. (3 marks)
[Enter your answer here]
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How To Achieve Financial Stability And Sustainability
Authors: Dr Javnyuy Joybert Joybert
1st Edition
131236789X, 978-1312367890
