Log in
Finance
1
answer
0
watching
217
views
28 Oct 2018

The current price of a stock is $33, and the annual risk-free rate is 3%. A call option with a strike price of $31 and 1 year until expiration has a current value of $6.60. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Round your answer to the nearest cent. $

Watch
1
answer
0
watching
217
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Deanna Hettinger
Deanna HettingerLv2
30 Oct 2018

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

1. As the stock’s price increases, a call option on the stock ___________ in value.

2. As the stock’s price increases, a put option on the stock ___________ in value.

3. Given two put options on the same stock with the same time to expiration, the put with the greater strike price will cost ________ than the put option with the lower strike price.

4. Given call put options on the same stock with the same time to expiration, the call with the greater strike price will cost ________ than the put option with the lower strike price.

5. Given two call options on the same stock with the same strike price, the call with the greater time to expiration will cost ________ than the call option with less time to expiration.

6. As the stock price becomes more volatile, then a call option on the stock ___________ in value.

7. How and why would the premium on an option differ depending on whether the stock pays a dividend prior to expiration or not.

1. Consider a call option with an exercise price of $35 and an expiration date in December and a put option with an exercise price of $35 and an expiration date also in December, both on a stock that is currently selling for $37 per share. Calculate how much these options are in or out of the money.

2. Suppose that both a call option and a put option have been written on a stock with an exercise price of $40. The current stock price is $42, and the call and put premiums are $3 and $0.75, respectively. Calculate the profit to the long and short positions for both the put and the call with an expiration day stock price of $30 and with a price at expiration of $45.

Q1. Put-call parity

Does put-call parity mean the put and the call option (of the same stock, with same expiration, with same strike price) have the same value/price?

If not, for put and call to have the same prices, what must be the relationship between the strike price and the current stock price?

Hint: Find the Apple option page from Yahoo Finance and look for the strike price where the call and put price are similar.

Q2.A European call option and a European put option on a stock both have the same strike price of $45 and expire in 6 months. Currently, the market call price is $10 and the put price is $6. The risk-free rate is 2% per annum, and the current stock price is $49. Identify the arbitrage opportunity open to the trader. All the interest rates are with continuous compounding.

Related Documents

FIN 380 Chapter 5: FIN380 CH5
sapphiregnat826
FIN 501
Final Exam
Study Guide
FIN 501 Study Guide - Call Option, Put Option, Straddle
beigefish258
FIN 300 Lecture Notes - Lecture 24: Net Income, Operating Cash Flow, Normal Distribution
bronzemule144

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in