QUESTION 1 "Assume zero rates and no dividends, the forward price is $100. How to make an arbitrage trade if the call (at K-80) is quoted at $101? the call at K-100 for and the forward at K-0 for (Please write "sell or "buy" for the first and third blanks and integers for the second and fourth blanks)"

QUESTION 1 "Assume zero rates and no dividends, the forward price is $100. How to make an arbitrage trade if the call (at K-80) is quoted at $101? the call at K-100 for and the forward at K-0 for (Please write "sell or "buy" for the first and third blanks and integers for the second and fourth blanks)"

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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S2.9978 QUESTION 10 What are the trades that you need to execute in order to profit from the arbitrage opportunity? O Sell the call, buy the put, short the stock and invest $98.5 for 5 months at 3%. O Buy the call, sell the put, buy the stock and borrow $98.5 for 5 months at 3%. O Buy the call, sell the put, short the stock and invest $98.5 for 5 months at 3%. O Sell the call, buy the put, buy the stock and borrow $98.5 for 5 months at 3%. O No arbitrage profit exists because the call is properly valued. QUESTION 11 6.6 A European put option with strike $100 expiring in 5 months is priced at $3.15. The underlying is a dividend paying stock, currently priced at $103.55. The stock is expected to pay dividends of $0.85 in 2 and 6 months. The risk-free rate is 3% per year. What is the price of a 5 month European call option with strike $100? O $4.6035 O $7.0965 O $3.7469 O $5.4409 O $1.8337 6,67 po QUESTION 12 Click Save and Submit to save and submit. Click Save All Answers to save all…
Given the following data and assume the margin listed, what will your return on the investment be on this short sale (assume it is a margin transaction)? Shares Price Margin New Price O 50% 5500 O-33% O 75% O -50% $40 50% O None of these are correct $25
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Problem 6-1 Financial Pages (LO1) Consider the table given below to answer the following question. Maturity Coupon Bid Price Asked Price Chg Asked Yield toMaturity (%) 15-02-2020 1.375 98.3281 98.3438 − 0.0078 2.228 15-02-2021 2.25 99.5781 99.5938 0.0313 2.391 15-02-2025 7.625 130.6719 130.6875 0.1094 2.770 15-02-2029 5.25 121.8516 121.9141 0.2344 2.908 15-02-2036 4.5 120.9063 120.9688 0.5313 2.986 15-02-2041 4.75 127.2422 127.3047 0.6641 3.084 15-02-2048 3 97.2656 97.2969 0.7266 3.140 a. What is the current yield of the 2.25% 2021 maturity bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
There are three currencies: alpha (a), beta (b) and gamma (c). The three exchangerates are as follows: 1 alpha buys you 5 betas; 1 beta buys you one half of onegamma; 1 gamma buys you one third of one alpha. That is,Xb/a = 5, Xc/b =1/2, Xa/c =1/3.There is no bid-ask spread, so that Xa/b = 1/Xb/a etc. There are six specialisttraders, AB, BA, BC. CB, CA and AC who trade the six possible pairs of currencies:trader AB lives in Alpha-land and wants to sell alphas for betas; trader BA livesin Beta-land and wants to sell betas for alphas; and so on. All of these traders arewilling to trade at the current market exchange rates, as quoted above. In the absence of arbitrage opportunities, what will be the relationship betweenthe three exchange rates Xb/a, Xc/b and Xa/c. Compare the relative importanceof least cost dealing and arbitrage in determining the relative equilibriumexchange rates.
Please correct my understanding under below situation and answer some question in below situation... text that inside " simbol is from the book. "Scenerio 1: Current SET50 index is 875 points. Mr.A Anticipate SET50 to significantly rise so Mr.A Open 1 long position on a call option at strike price 875 points and pay premium 25 points. Mr. B short this call option. Now Mr.A & Mr.B is counterparty." (I doubt that Can Mr.B open short call position before counterparty open long call position and Mr.B must have underlying asset of the option or not, if not in expiration date, counterparty exercise this call option what's happen to Mr.B) "Before expiration date SET50 index is 890. Suppose premium is then 47 points. Mr A make decion to short close this option(close out before expiration). Then Mr.A earn the premium” In my understanding A will earn the premium equal to 47 minus 25 point by short closed this option and I doubt whether this long call 1 position at 47 points will be closed by…
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(35) (P-C Parity Arbitrage) A European Call price is C= $ 3.50, on a ZERO dividend. A similar Put price is P= $ 2.50. The stock price S= $ 51 , strike price X= S 50 , T= 1 year, and R = 2%. (a) Determine what the CALL Price SHOULD be. (b) How much should your arbitrage profit be? (c) Focusing on Real vs. Synthetic Call, specify ALL time 0 trade details. (d) At expiration in 1 year at T, show the ending details { both if S is HIGH or LOW }.

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