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The continuously compounded risk-free interest rate is 0.06. S y stock pays no dividends and is priced at $50. S x stock is priced at
The continuously compounded risk-free interest rate is 0.06. Sy stock pays no dividends and is priced at $50. Sx stock is priced at $45 and has quarterly dividends of $2, with the next dividend payable in 3 months. Suppose, M is the premium of an option to give Sx and receive Sy at the end of 9 months. Also, suppose that N is the premium of an option to give Sy and receive Sx at the end of 9 months. What is M N ? Show all your work and any associated formulas that were used.
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