We are valuating the options of ABC Inc with following information Stock price (P s ) $48 Strike (P e ) $40 Time to expiration (T) 0 5 Standard deviation () 0 5 Interest rate (r) 0 08 Through Black Scholes model, we find that the price of a call option as $11 99 By the put call parity, what should be the price of the put option

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 06, 2024

We are valuating the options of ABC Inc with following information. Stock price (P s ) $48 Strike (P e ) $40 Time to expiration

We are valuating the options of ABC Inc with following information.

Stock price (P_s)	$48
Strike (P_e)	$40
Time to expiration (T)	0.5
Standard deviation ()	0.5
Interest rate (r)	0.08

Through Black-Scholes model, we find that the price of a call option as $11.99. By the put-call parity, what should be the price of the put option?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

Step: 3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Regulation In The EU From Resilience To Growth

Authors: Raphaël Douady , Clément Goulet, Pierre-Charles Pradier

1st Edition

3319442864,3319442872

Students also viewed these Finance questions

Question

★★★★★

You purchase a rectangular piece of metal that has clemencies 5.0 x 15.0 x 30.0 nun and mass 0.0158 kg. The seller tells you that the metal is gold. To check this, you compute the average density of...

Answered: 1 week ago

Question

★★★★★

Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 30 percent per year during the next three years, 20 percent over the following year, and then 6 percent per year...

Answered: 1 week ago

Question

★★★★★

Write short note on (i) Privatisation

Answered: 1 week ago

Question

★★★★★

The comparative financial statements of Tec Solutions Inc. are as follows. The market price of Tec Solutions Inc. common stock was $89.75 on December 31, 2012. Instructions Determine the following...

Answered: 1 week ago

Question

★★★★★

Find the future value of the following investment. Principal Nominal Rate Frequency of Conversion Time $8320.00 4.34.3% semi-annually 11 years The future value is $. (Round the final answer to the...

Answered: 1 week ago

Question

★★★★★

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $280,000, and it would cost another $12,000 to modify the equipment for special use by the firm....

Answered: 1 week ago

Question

★★★★★

Suppose the Super Bowl is this week, and Susan is in need of a television to watch the big game. As a college student, Susan knows that she can either buy her flat-screen television at the local...

Answered: 1 week ago

Question

★★★★★

1 - Two circular bars are connected in series, as shown in the figure. An upward pressure of 70 MPa is applied on the exposed end surface of Bar 1. A downward load of 1000 kN is applied at the end of...

Answered: 1 week ago

Question

★★★★★

Aug 10 Sold 500 running drink bottles for $4.80 each plus HST, and 750 recreational drink bottles for $3.50 each plus HST, to Universal Sports, 3 Main Street, Banff, Alberta B4H 2D3, on invoice 1002...

Answered: 1 week ago

Question

★★★★★

Ron, Sue, and Ted arrive at the beginning of a professor's office hours. The amount of time they will stay is exponentially distributed with means of 1, l/2, and 1/3 hour. (a) What is the expected...

Answered: 1 week ago

Question

★★★★★

Your project is to paint a 20-storey building with 4 painters and your budget is $20,000/floor and your estimate is to complete the project in 20 months. How does earned value give cost status than a...

Answered: 1 week ago

Previous Question Next Question