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QUESTION

The price of the stock is $37 and interest rates are 8% per annum continuously compounded and there are 2 years to expiration.

1.    The price of the stock is $37 and interest rates are 8% per annum continuously compounded and there are 2 years to expiration. If the price of the Call with strike of 40 is $9 per share quoted price and the price of the Put with strike of 40 is $7 per share quoted price then

a.    Find the quoted per share price of the 40 conversion, correct ot 2 places after the decimal point.   

                                     The price is __________

b.    Find the quoted per share value of the 40 conversion, correct to 2 places after the decimal point.    

                                      The value is _________

c.      Find the price of synthetic stock using a strike of 40, correct to 2 places after the decimal point.   

                                       The price is ________

d.      Would you buy the natural stock or the synthetic stock. 

A.    Natural   B. Synthetic            

I need the solution step by step           

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