Question

Consider a European call option and a European put option, both of which have a strike price of $70, and expire in 4 years. The current price of the stock is $60. If the call option currently sells for $0.15 more than the put option, the continuously compounded interest rate is

3.9% |
||

4.9% |
||

5.9% |
||

2.9% |

Answer #1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Consider a European call option and a European put option, both
of which have a strike price of $70, and expire in 4 years. The
current price of the stock is $60. If the call option currently
sells for $0.15 more than the put option, the continuously
compounded interest rate is
a. 2.9%
b. 3.9%
c. 4.9%
d. 5.9%

Consider a European call option and a European put option on a
non dividend-paying stock. The price of the stock is $100 and the
strike price of both the call and the put is $104, set to expire in
1 year. Given that the price of the European call option is $9.47
and the risk-free rate is 5%, what is the price of the European put
option via put-call parity?

A
European call option and put option on a stock both have a strike
price of $20 and an expiration date in three months. Both sell for
$3. The risk-free interest rate is 10 % per aunum, the current
stock price is $19 , and a $1 dividend is expected in one month.
identify the arbitrage oppotunity to a trader.

A
European call option and put option on a stock both have a strike
price of $20 and an expiration date in three months. Both sell for
$2. The risk-free interest rate is 5% per annum, the current stock
price is $25, and a $1 dividend is expected in one month. Identify
the arbitrage opportunity open to a trader.

A European call option and put option on a stock both have a
strike price of $25 and an expiration date in four months. Both
sell for $4. The risk-free interest rate is 6% per annum, the
current stock price is $23, and a $1 dividend is expected in one
month. Identify the arbitrage opportunity open to a trader.

A European put option is currently worth $3 and has a strike
price of $17. In four months, the put option will expire. The stock
price is $19 and the continuously compounding annual risk-free rate
of return is .09. What is a European call option with the same
exercise price and expiry worth? Also, given that the price of the
call option is $5, show how is there an opportunity for
arbitrage.

For a European call option and a European put option on the same
stock, with the same strike price and time to maturity, which of
the following is true?
A) When the call option is in-the-money and the put option is
out-of-the-money, the stock price must be lower than the strike
price.
B) The buyer of the call option receives the same premium as the
writer of the put option.
C) Since both the call and the put are risky...

For a European call option and a European put option on the same
stock, with the same strike price and time to maturity, which of
the following is true?
A) Before expiration, only in-the-money options can have
positive time premium.
B) If you have a portfolio of protected put, you can replicate
that portfolio by long a call and hold certain amount of risk-free
bond.
C) Since both the call and the put are risky assets, the
risk-free interest rate...

The price of a European put option on a stock with a strike
price of $30.00 is $6.80. The stock price is $28.00, the
continuously compounded risk-free rate (all maturities) is 4% and
the time to maturity is one year. A dividend of $2.00 is expected
in three months. What is the price of a one-year European call
option on the stock with a strike price of $30.00?
Select one:
a. $7.22
b. $4.00
c. $6.98
d. $4.74

The price of a European call option on a non-dividend-paying
stock with a strike price of $50 is $6. The stock price is $51, the
continuously compounded risk-free rate (all maturities) is 6% and
the time to maturity is one year. What is the price of a one-year
European put option on the stock with a strike price of $50?
a)$9.91
b)$7.00
c)$6.00
d)$2.09

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