Answered You can buy a ready-made answer or pick a professional tutor to order an original one.
The price of a European call that expires in six months and has a strike price of $50 is $5. The underlying stock price is $52, and a
The price of a European call that expires in six months and has a strike price of $50 is $5. The underlying stock price is $52, and a dividend of $1.00 is expected in three months. The term structure is flat, with all risk-free interest rates being 10%.
a. What is the price of a European put option on the same stock that expires in six months and has a strike price of $50?
b. Explain in detail the arbitrage opportunities if the European put price is $0.50. How much will be the arbitrage profit?
- @
- 165 orders completed
- ANSWER
-
Tutor has posted answer for $30.00. See answer's preview
*** ***** ** * European call **** ******* ** *** months *** has a strike price ** $50 ** ** *** ********** ***** ***** is *** *** * ******** of **** ** expected ** ***** ****** *** term ********* ** **** **** *** ********* ******** rates ***** *************** Rate10%Underlying ***** ****** ************* ********* ****** 5000Split$ ******** Price$ ********** ****** 4500Price$ ******* *** ***** *** ** **** ** ** ********* to buy *** *** *** go ***** ** the ********* **** = C + X/(1 * risk free ****** - *** *** ***** **** call and go ***** ** *** **** **** ***** **** ***** equal ** ****** priceArbitrage profit245European *** **********
