Question
You identify an Microsoft 180-day call option with an exercise price of $20. In the next 180 days, Microsoft is not expected to pay any
You identify an Microsoft 180-day call option with an exercise price of $20. In the next 180 days, Microsoft is not expected to pay any dividends. The option sells for $3.30. Additionally, there is a 180-day put option with an exercise price of $20. This put sells for $1.00. You have also found a 180-day put option with an exercise price of $17.50. This put sells for $0.35. The expected market return is 11% and the risk-free rate is 3%. Using the information provided, determine the value of the 180-day Microsoft call option with an exercise price of $17.50.
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