Question
You observe the following prices in a situation in which European put-call parity ought to apply: Put price $0.25, Call price $0.11, Share price $2.00,
You observe the following prices in a situation in which European put-call parity ought to apply: Put price $0.25, Call price $0.11, Share price $2.00, Exercise price $2.00, Term to expiry 4 months, and risk-free interest rate 1% per month (compounded monthly). The prices of these options and the share price suggest that:
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Public Finance A Contemporary Application of Theory to Policy
Authors: David N Hyman
11th edition
9781305474253, 1285173953, 1305474252, 978-1285173955
