The cc risk free rate is 2.75%. The spot price of TFS is 33.25 and TFS pays a cc dividend of 1.0%. Here is a list of option prices for TFS options expiring in 6 months. Strike Price 30.00 32.50 40.00 Call Price 4.75 3.95 0.87 Which of the following portfolios guarantees an arbitrage profit of at least $0.05? a. Long C30, short P30, short C35, long P35. b. Long 0.75 C30, short C32.5, long 0.25 C40. c. Short 1 share of stock, long C32.5, short P32.55. Od. Long 0.75 P30, short P32.5, long 0.25 P40- Oe. Long 1 share of stock, short C32.5, long P32.5- Put Price 1.25 2.92 7.24
The cc risk free rate is 2.75%. The spot price of TFS is 33.25 and TFS pays a cc dividend of 1.0%. Here is a list of option prices for TFS options expiring in 6 months. Strike Price 30.00 32.50 40.00 Call Price 4.75 3.95 0.87 Which of the following portfolios guarantees an arbitrage profit of at least $0.05? a. Long C30, short P30, short C35, long P35. b. Long 0.75 C30, short C32.5, long 0.25 C40. c. Short 1 share of stock, long C32.5, short P32.55. Od. Long 0.75 P30, short P32.5, long 0.25 P40- Oe. Long 1 share of stock, short C32.5, long P32.5- Put Price 1.25 2.92 7.24
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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Transcribed Image Text:The cc risk free rate is 2.75%. The spot price of TFS is 33.25 and TFS pays a cc dividend of 1.0%. Here is a list of option
prices for TFS options expiring in 6 months.
Strike Price
Call Price
Put Price
30.00
4.75
1.25
32.50
3.95
2.92
40.00
0.87
7.24
Which of the following portfolios guarantees an arbitrage profit of at least $0.05?
a. Long C30, short P30, short C35, long P35.
b. Long 0.75 C30, short C32.5, long 0.25 C40-
C.
Short 1 share of stock, long C32.5, short P32.55.
O d. Long 0.75 P30, short P32.5, long 0.25 P40-
O e. Long 1 share of stock, short C32,5, long P32,5.
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