It is possible to buy three-month call options and three-month puts on stock Q. Both options have an exercise price of $64 and both are worth $14.
If the interest rate is 6.15% a year, what is the stock price? (Hint: Use putâcall parity.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Stock price $
It is possible to buy three-month call options and three-month puts on stock Q. Both options have an exercise price of $64 and both are worth $14.
If the interest rate is 6.15% a year, what is the stock price? (Hint: Use putâcall parity.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Stock price $
Related questions
| The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next 6 months. You do not know whether it will go up or down, however. The current price of the stock is $120 per share, and the price of a 6-month call option at an exercise price of $120 is $8.89. |
| a. | If the risk-free interest rate is 8% per year, what must be the price of a 6-month put option on P.U.T.T. stock at an exercise price of $120? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) |
| Put-call parity | $ |
| b. | What would be a simple options strategy to exploit your conviction about the stock priceâs future movements? How far would it have to move in either direction for you to make a profit on your initial investment? (Round your intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.) |
| Total cost of the straddle | $ |
