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The spot price of the market index is $900. After 3 months the market index is priced at $920. The annual rate of interest on
The spot price of the market index is $900. After 3 months the market index is priced at $920. The annual rate of interest on treasuries is 4.8% (0.4% per month). The premium on the long put, with an exercise price of $930, is $8.00. At what index price does a long put investor have the same payoff as a short index investor? Assume the short position has a breakeven price of $930.
(a) $921.90 (b) $930.00 (c) $938.10 (d) $940.00
Answer is C, can you please show work.
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