Student loan debt in 2020 is the highest ever. There are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. Student loan debt is now the second highest consumer debt category - behind only mortgage debt - and higher than both credit cards and auto loans. Unable to obtain a student loan, you decide to use the options market to help pay for your tuition at UCI. You consider European options on a single share of Apple (ticker: AAPL) stock and assemble a portfolio of European options as follows: Short 100 at-the-money call options Long 100 at-the-money put options Long 100 out-of-the-money call options with strike price K Short 100 in-the-money put options with strike price k All options have an expiration date of 1 year. The risk-free annual continuously compounded interest rate is zero. AAPL is currently trading at $250. Assume the stock does not pay any dividends. Assume there is no arbitrage in the market. Determine the strike price K such that this options portfolio replicates a 1-year interest-free student loan for $15,000 as follows: You receive $15,000 in net option premium today You pay $15,000 at expiration in one year Please round your answer to the nearest integer. Student loan debt in 2020 is the highest ever. There are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. Student loan debt is now the second highest consumer debt category - behind only mortgage debt - and higher than both credit cards and auto loans. Unable to obtain a student loan, you decide to use the options market to help pay for your tuition at UCI. You consider European options on a single share of Apple (ticker: AAPL) stock and assemble a portfolio of European options as follows: Short 100 at-the-money call options Long 100 at-the-money put options Long 100 out-of-the-money call options with strike price K Short 100 in-the-money put options with strike price k All options have an expiration date of 1 year. The risk-free annual continuously compounded interest rate is zero. AAPL is currently trading at $250. Assume the stock does not pay any dividends. Assume there is no arbitrage in the market. Determine the strike price K such that this options portfolio replicates a 1-year interest-free student loan for $15,000 as follows: You receive $15,000 in net option premium today You pay $15,000 at expiration in one year Please round your answer to the nearest integer
