VERSION 1 FINANCE 362 QUESTIONMNSWER BOOK Name: AUID: PART B QUESTION 21 (:1) Details of prices of stock, derivatives and interest rates are as follows: - ABC's stock price is $22.50 at time 0 - The European options on ABC have a common strike price K=$20 and mature in T=IS months. Today's put price is $0.50. - The continuously compounded risk-free interest rate is 5% per mm. - Non dividends are paid on ABC's stock over the option's h'fe. Required: Determine the price of the call on ABC's stock by creating the following two portfolios: i A stock purchase plan portfolio: long stock and short bonds to borrow the present 1value of strike I Synthetics short stock: short call and long put (10 marks)