Question
The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6. The stock price is $51, the
The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6. The stock price is $51, the continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year. What is the price of a one-year European put option on the stock with a strike price of $50?
ANSWER: 2.09, USE THIS FOR FOLLOWING QUESTION
In the prior problem, if the put were selling for too high a price, i.e., c + Ke -rT < p + S0, describe the arbitrage strategy you would employ in order to earn a riskless profit?
ANSWER BOTTOM QUESTION PLS
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Personal Finance
Authors: Thomas Garman, Raymond Forgue
12th edition
9781305176409, 1133595839, 1305176405, 978-1133595830
