Question
Todays price of Apple (AAPL) is $200 per share. AAPL does not pay dividends. The annualized volatility of AAPL is 27 percent. The c.c. risk-free
Todays price of Apple (AAPL) is $200 per share. AAPL does not pay dividends. The annualized volatility of AAPL is 27 percent. The c.c. risk-free interest rate is zero percent. You are interested in an at-the-money European call option on AAPL with a maturity of one year. The market price of the call option is $25. Is there an arbitrage? Assume the Black-Scholes assumptions are true. If so, what should you buy and what should you sell? Group of answer choices
No. Yes; sell the call and buy the replicating portfolio.
Yes; buy the call and sell the replicating portfolio.
Yes; sell the call and sell the replicating portfolio.
Yes; buy the call and buy the replicating portfolio.
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Financial Modeling Using Excel And VBA
Authors: Chandan Sengupta
1st Edition
0471267686, 978-0471267683
