Question

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

Answer #1

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The price of a European call option on a non-dividend-paying
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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

Suppose that a 6-month European call A option on a stock with a
strike price of $75 costs $5 and is held until maturity, and
6-month European call B option on a stock with a strike price of
$80 costs $3 and is held until maturity. The underlying stock price
is $73 with a volatility of 15%. Risk-free interest rates (all
maturities) are 10% per annum with continuous compounding.
Use put-call parity to explain how would you construct a
European...

A
European call option and put option on a stock both have a strike
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identify the arbitrage oppotunity to a trader.

Consider an option on a stock where the stock price is $30, the
strike price is $29, the continuously compounded risk-free rate of
return is 5% per year, the continuously compounded standard
deviation of its return is 25% per year and the time to maturity is
4 months. If this stock is due to go ex-dividend in 1.5 months and
paying a dividend of $0.50 then the Black-Scholes price of a
European call on the stock is closest to what...

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.

A European call option on a stock with a strike price of $50 and
expiring in six months is trading at $14. A European put option on
the stock with the same strike price and expiration as the call
option is trading at $2. The current stock price is $60 and a $1
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with face value of $100 and maturing after 3 months and 6 months
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Consider a European call option and a European put option on a
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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%

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