The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next 3 months. You do not know whether it will go up or down, however. The current price of the stock is $120 per share, and the price of a 3-month call option at an exercise price of $120 is $5.20. a. If the risk-free interest rate is 7% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $120? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Put-call parity b. What would be a simple options strategy to exploit your conviction about the stock price's future movements. How far would it have to move in either direction for you to make a profit on your initial investment? (Round your intermediate calculations and final answer to 2 decimal places.) Strategy Price change for profit 2547 Futures Contracts I WS.com/commodities Contract Open Open High Now Settle Cg interest Metal & Petroleum Futures Contact Open Coffee ICE-US 37.500bscents per Open High Nilo low Sale Che March 101.56 103.45 A 101.15 102.75 1.15 127.130 Copper High (CM) 25,000 bs: Sports May 104.40 1065 A 104.30 105.75 1.10 60.630 2.6445 2.646026410 26410-00105 1.756 Sugar World (ICE US-112,000 scans perib. March 11.95 1267A 11 12.05 12 March 26500 265952631526370-00105 39.95 138,638 May 12.04 12.73 A 12.03 12.12 70 188.201 Gold CM-100 troy, Spettroye Jan Sugar-Domestic (ICE US-112.000 cents per 128450 1296.30 4.10 353 FD March 25.40 25.40 25 25.40 4.10 2.718 1287.00 1297.00 1254.10 1200.90 302,111 May 25.50 2554A2550 25.50 - 01 2.465 ane 1256.50 130.00 129050 130290 Aug 13000 1315.10 307 80 1209.00 4.10 10:37 Cotton (ICE-US50,000 lbscents par b. DK 131760 1826801317.60 1221.50 4.10 9810 March 72.52 7.92 A 72.48 72.75 23 126.870 Feb 20 1327.50 1331.00 132730 1327.70 4.20 May 73.99 7523 732 74.10 16 39.033 Palladium NVM, 50 troya: per troy Orange Juice ICE-U5) 15.000 lbs: cents perib March 1242.40 1249.00 A 123080 1240 20 5.80 24.97 12120122.00 21.15 121.45 65 582 Ane March 4.70 1226 20 1231.50 1216.10 1224.30 3.313 122.75 124.80 123.85 55 14.103 Platinum (NY50 boy portray Jan Interest Rate Futures 824.20 825.00 A 21.00 18.40 -2.50 251 April 822 2083650 A $23.30 824.30 85.561 Treasury Bonds (ET)$100.000 ps 32nds of 100% Silver CMX)-5.000 bry. Sperry March 145230 147-170146-040 146-160-120 94.912 15.750 15.750 15.750 15.669-0026 une 145-160 146-190 145-300 145-270 -10 61 March 15.800 15.880 1560 15.756 -0.030 142916 Treasury Notes (CET$700.000 pt32.ds of 100 Crude Oil, Light Sweet NM-1.000 sportel March 122-060 122-150121-290 122.015 -80 4.102.53 Feb 4822 48.52 49.79 9.11 Ane 056 122-150 122-240122045 122-105 -75 2418 357.100 March 48.49 5011 A 43.44 0.54 3191 5 Y. Treasury Notes (n) $100.000 pts 32nds of 100% April 48.85 5040 A 43.80 4.17 136,259 March 114.215 114-280 114-155 114-187 -55 4.5.0.715 May 500 32 40.60 0.50 115.840 2 Yr. Treasury Notes (CT) $200.000pts 32nds of 100% Aune 49.79 51.33 A 1972 50.04 0.48 229.259 March 105-045 106.065 106-010 106-025 -27 2.552.900 De 5132 527 A5130 51.48 0.40 191.30 30 Day Federal Funds GT 35,000,000, 100-dolyng NY Harbor ULSDINTH-42.000 gal: Spergul Jon 97.000 9600 9.500 Fab 97596-00 317.52 17775 18245 A 17764 1.7784 002 109341 Apel 97,606 97615 ST 600 97.505-005 31713 March 17601 18160 A 1.7600 1.7714 0104 73598 10 Yr. Del. Int. Rate Swaps CRT $100.000 pes32.ds of 100% Gasoline NY RBOB NYH-42.000 gal per March 102.766 72.797 102.297 102.391 -219 27.938 Feb 1355 13945 1.3408-0070 120.556 March 1 Month Libor (CME) $3.000.000pts of 100% 13716 14080 1.3541 - 0077 97.4875 0075 535 Natural Gas NM10,000 per Me FD Eurodollar (CME) $1,000.00 pts of 100% 2.962 2010 2.944-100 174258 97.2300 97.2375 51.2250 97.2300 0050 March 2812 2886 2.790 -058 270.970 March 97.2850 97.3150 97.2850 97.3000 0050142121 April 2010 2.700 2640 2.677 143,613 May Ane 97.3050 973450 97.2900973150 1252.674 2637 2.687 2.625 2012 - oce 132.414 My 2.718 2.765 2.700 Dec 97.3650 97.4100 97.3050 97.3550 -0250 1.740.407 2.746 -2007 62.540 Oct 2710 2761 2.751 -016 105415 Currency Futures Agriculture Futures Japanese Yen (CHE) 12.500.000 $ per yox 9211 Corn CoT5.000 bu: cents per bu 9213-000 1190 March 92729310 9247 March 382.35 384.00 A 38115 9259-000 222.921 382.25 751,542 MY 397.50 399.00 A 307.00 397.50 242,635 Canadian Dollar HD-CAD 100.000 per CD 7479 750.7479 3522 0054 223 Oats (GT) 5,000 bucurs perbe March 2014 7544 AM 0054 March 106,071 279.50 28025 276.50 27950 -50 4.124 Mary 279.50 27950 274.00 276.00 638 British Pound CME) 62.500.5 per Jun Soybeans (CBT) 5.000 bucents per bu 1.2747 12775 A 12729 12775 0031 2616 March 12780 12832 A 1.2764 Jan 0031 204620 909.50 915.75 A 90050 91225 12815 2.75 3422 March 921.00 27.75 A 920.75 2.75 337 323 Swiss Franc (CME-CHF 125.000 $ per CHF March 1.0206 1.0285 A 1.0206 1.0277 0031 66.727 Soybean Meal (CBT) 100 tons perton Ane 103301039 A 10292 0031 56 Jun 10360 316.00 319.30 A 316.00 18.20 710 1190 March 3194032330 A 319 20 32220 320 193.399 Australian Dollar (CHE-AUD 100,000 $ per AUD 71257150 A 2124 301 Soybean Oil (CBT) 60,000 lbs: cents perb Feb 28.26 7135714 7135 28.55 A 2.26 0026 680 2147 -15 972 March March 71297158 712 124.074 28.80 A 28.47 28.51 - 13 219,516 April 744 718 7144 Rough Rice (CT) 2,000 cwt; 5 percnt. 3153 0026 7139 7160 A 7130 011 March 1048.00 100.00 A 104.00 1066.50 18.50 Sept7147 7161 7147 J160 0026 121 May 150 108350 A 10750 1082.50 18.50 302 Mexican Peso (CHE) MXN 500,000, 5 per NON Wheat CBT) 5.000 bucets per bu March 1610765129 A 0084 05113 00014 161111 March 518.00 518.5051350 516.75 229.628 une 04890 04905 A 1488T 0503500013 35 530.50 530.50 525.50 527.00 -250 76.57 EuroCMEC 125.000 per Wheat IKC 5,000 bu..cants per bu. 1.115 1188 1.1415 0079 1938 Much 5.625 507.25 500 50 503.00 -3.00 182341 March 1.1475 1.1551 1.1471 1.1547 0019 May 51750518.75 512.00 514.50 -3.00 55.722 Wheat (PLS) 5,000 bucents per bu Index Futures March 57025 372.00 6.50 568.00 -225 33.947 Mini DJ Industrial Average (GBT-$5 x Index May 575.50 577.25 570.75 573.25 -2.25 13,173 March 23470 2368 A 21279 23512 117 72.535 Cattle Feeder CME) 50,000 lbs., cents per Dec 23523 23686 A 22350 23530 118 544 144,600 146.25 7164200 140.000 1.100 S&P 500 Index CHE 250 x ind March 142.150 144.425 142.000 143.900 1,075 25.193 March 2536.70 2567.00 A 2505.00 2550.60 19:30 39.216 Cattle-Live (CHE-40.000 lbs:cents perb Mini S&P 500CME 50 X index Feb 121.800 123.400 Y 121.425 123.200 1.275 129.414 19.20 2.61422 April 123.850 125.375 123500 125.075 March 2537 25 2567.50 AZS2325 2550.50 1.075 115,3 Ane 2540 25 257125 A 2828.50 2555.00 19.40 27.554 Hogs Lean (CHE) 10,000 lbs.center Mini S&P Midcap 400 CMD-50 x Index Fab 61.560 2.150 61.250 61.900 -050 79,849 March 1800.00 171.10 A 1679.20 1703.30 17.30 09.220 Aps 66.700 66.900 6595 66.375 - 975 5089 Mini Nasdaq 100 CHES20 x index Lumber (CMQ-110,000 bdt; $per 1000 bd. t. March 64513 65:58 A 64025 406.5 625 196.948 326 20 325.20 32430 120 298 54715 65570 A $4270 6520.8 1.150 March 382 20 333.00 328.00 330.30 90 2.724 Mini Russell 2000 CHE 550 Index Milk CME) 200,000 seb March 1384.40 1414.60 A 1375.80 1405.9024.30 14.16 1426 14.12 14.14 - 11 4,331 Ane 1901.60 141780 A 13000 1410.50 25.00 514 Feb 1472 14.73 1455 1457 - 17 4095 Mini Russell 1000 CME) 550 X index Cocoa ICE-US-10 metric tons: 5 perton March 1400.00 1418.50 14000 1400.80 10.70 7.654 March 2.32 2.750 2.410 49 96.443 U.S. Dollar Index (CEUS-1.000 de May 2.396 249 2. 2.447 49 51.909 March 56.71 56.73 620 95.23 -50 57.402 Ane 56.08.08 9475 94.74 -51 3143 3150 Ar 160 DORT 2413 Figure 22.1 Futures listings Source: The Wall Street Journal, July 6, 2016