A stock priced at $65 has three-month calls and puts with an exercise price of $55 available. The calls have a premium of $3.91, and the puts cost $1.6. The risk-free rate is 1.6%. If the put options are mispriced, what is the profit per option assuming no transaction costs? Bring out 4 decimal places
A stock priced at $65 has three-month calls and puts with an exercise price of $55 available. The calls have a premium of $3.91, and the puts cost $1.6. The risk-free rate is 1.6%. If the put options are mispriced, what is the profit per option assuming no transaction costs? Bring out 4 decimal places
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A stock priced at $65 has three-month calls and puts with an exercise price of $55 available. The calls have a premium of $3.91, and the puts cost $1.6. The risk-free rate is 1.6%. If the put options are mispriced, what is the profit per option assuming no transaction costs?
Bring out 4 decimal places
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