Question

The premium of a call option with a strike price of $50 is equal
to $6 and the premium of a call

option with a strike price of $60 is equal to $3. The premium of a
put option with a strike price of $50

is equal to $4. All these options have a time to maturity of 6
months. The risk-free rate of interest is

7%. In the absence of arbitrage opportunities, what should be the
premium of a put option with a strike

price of $60?

Answer #1

Proper solution is provided.

The premium of a call option with a strike price of $50 is equal
to $5.5 and the premium of a call option with a strike price of $55
is equal to $4. The premium of a put option with a strike price of
$50 is equal to $3.5. All these options have a time to maturity of
6 months. The risk-free rate of interest is 9%. In the absence of
arbitrage opportunities, what should be the premium of a...

The premium of a call option with a strike price of $45 is equal
to $5 and the premium of a call option with a strike price of $50
is equal to $3.5. The premium of a put option with a strike price
of $45 is equal to $3. All these options have a time to maturity of
3 months. The risk-free rate of interest is 8%. In the absence of
arbitrage opportunities, what should be the premium of a...

The premium of a call option with a strike price of $45 is equal
to $5 and the premium of a call
option with a strike price of $50 is equal to $3.5. The premium of
a put option with a strike price of
$45 is equal to $3. All these options have a time to maturity of 3
months. The risk-free rate of interest
is 8%. In the absence of arbitrage opportunities, what should be
the premium of a...

The premium of a call option with a strike price of $45 is equal
to $4.5 and the premium of a call
option with a strike price of $55 is equal to $2. The premium of a
put option with a strike price of $45
is equal to $2.5. All these options have a time to maturity of 3
months. The risk-free rate of interest is
6%. In the absence of arbitrage opportunities, what should be the
premium of a...

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
dividend is expected in three months. Zero coupon risk-free bonds
with face value of $100 and maturing after 3 months and 6 months
are trading at $99...

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
dividend is expected in three months. Zero coupon risk-free bonds
with face value of $100 and maturing after 3 months and 6 months
are trading at $99...

A call option is currently selling for $3.40. It has a strike
price of $60 and seven months to maturity. What is the price of a
put option with a $60 strike price and seven months to maturity?
The current stock price is $61, and the risk-free interest rate is
6 percent. What is the Put Price ?
I put 0.34 but it was not the correct answer.

The price of a European call that expires in six months and has
a strike price of $28 is $2. The underlying stock price is $28, and
a dividend of $1 is expected in 4 months. The term structure is
flat, with all risk-free interest rates being 6%. If the price of a
European put option with the same maturity and strike price is $3,
what will be the arbitrage profit at the maturity?

a) A stock currently sells for $33.75. A 6-month call option
with a strike price of $33 has a premium of $5.3. Let the
continuously compounded risk-free rate be 6%.
What is the price of the associated 6-month put option with the
same strike (to the nearest penny)?
Price = $ -------------------
b) A stock currently sells for $34.3. A 6-month call option with a
strike price of $30.9 has a premium of $2.11, and a 6-month put
with...

The strike price for a European call and put option is $56 and
the expiration date for the call and the put is in 9 months. Assume
the call sells for $6, while the put sells for $7. The price of the
stock underlying the call and the put is $55 and the risk free rate
is 3% per annum based on continuous compounding. Identify any
arbitrage opportunity and explain what the trader should do to
capitalize on that opportunity....

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