Question
A call and a put are held in a portfolio, having an exercise price of $150,...
A call and a put are held in a portfolio, having an exercise price of $150, the premium for the call is $5.00, the premium for the put is $2.00, and the risk free rate is 6%.
A. Using continuous compounding what is the Spot price of the stock if both options expire in 3 years
B. Using monthly compounding, what is the Spot price of the stock if both options expire in 3 years?
Show formula
Homework Answers
Answer #1
A. Continuous compounding:
We can compute the spot price of the stock using Put-Call Parity equation:
where,
S = spot price of the stock
C = Call premium
X = exercise price
P = Put premium
r = risk free rate
t = maturity
B. Monthly compounding:
We can compute the spot price of the stock using Put-Call Parity equation:
where,
S = spot price of the stock
C = Call premium
X = exercise price
P = Put premium
r = risk free rate
t = maturity
Not the answer you're looking for?
Similar Questions
A call and a put are held in a portfolio, both have an exercise price of...
A call and a put are held in a portfolio, both have an exercise
price of $140
Premium for the call is $5.00
Spot price of the stock is $145, and the risk free rate is
4%.
A. Using continuous compounding, what is the Premium of the Put
if both options expire in 2.5 years?
B. Using monthly compounding, what is the Premium of the Put if
both options expire in 2.5years?
C. Does the Put-Call Parity equation work when...
A call and a put are held in a diversed portfolio & they both have an...
A call and a put are held in a diversed portfolio & they
both have an exercise price of $140
The Spot price of the stock is $100
Risk free rate is 6%.
Use Put-Call Parity for A& B
A. The premium for the Call is $15.00, what is the Premium for
the Put, given both options expire in 1.5 years?
B. The Premium for the Put is $3.00 and both options expire in
3.5 years, then how much is...
Exercise price $150 Spot Price $110 Risk rate is 5% Using Put-Call Parity & continuous compounding...
Exercise price $150
Spot Price $110
Risk rate is 5%
Using Put-Call Parity & continuous compounding
A. If the premium for the Call is $12.00,what is the Premium for
the Put, given both options expire in 1.5 years?
B If the Premium for the Put is $3.00 and both options expire in
3.5 years, then how much is the Premium for the Call option?
Using excel!
A stock sells for $60 and the risk free rate of interest is 5 percent. A...
A stock sells for $60 and the risk free rate of interest is 5
percent.
A call and
a put on this stock expire in one year and both options have an
exercise price of $55.
How would
you trade to create a synthetic call option?
If the put
sells for $3, how much is the call option worth ? Assume continuous
compounding?
A call and put expire in 0.41 year and have an exercise price of $100. The...
A call and put expire in 0.41 year and have an exercise price of
$100. The underlying stock is worth $90 and has a standard
deviation of 0.25. The annual risk-free rate is 11 percent. The
annual dividend yield (q) on the stock is 2%. The put option price
from the three-period binomial model is:
8.67
9.467
9.207
7.593
A call and put expire in 0.41 year and have an exercise price of $100. The...
A call and put expire in 0.41 year and have an exercise price of
$100. The underlying stock is worth $90 and has a standard
deviation of 0.25. The annual risk-free rate is 11 percent. The
annual dividend yield (q) on the stock is 2%. The put option price
from the three-period binomial model is:
8.67
9.467
9.207
7.593
You purchase 100 put options on a stock with exercise price of $52 at a premium...
You purchase 100 put options on a stock with exercise price of
$52 at a premium of $4.30 per put. You also purchase 100 call
options on the same stock with exercise price of $54 and call
premium of $5.10 per call. If at expiration of the options (the
options expire on the same date), the stock's price is $52.79,
calculate your profit.
According to put-call parity, the present value of the exercise
price is equal to the:
A.
Stock...
Portfolio of options on shares of a non-dividend paying stock. The portfolio consists of: Long call...
Portfolio of options on shares of a non-dividend paying stock.
The portfolio consists of:
Long call with a strike price of 50
Short call with a strike price of 55
Long put with a strike price of 55
Short put with a strike price of 50
All options expire in 2 months.The current price of one share of
stock is 48.00. The risk-free interest rate is 3%.
1. Determine the cost of the portfolio?
2. Determine the maximum and minimum...
For a European call option and a European put option on the same stock, with the...
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...
For a European call option and a European put option on the same stock, with the...
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...
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 2 minutes ago
asked 7 minutes ago
asked 12 minutes ago
asked 24 minutes ago
asked 24 minutes ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago