The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $145 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $145 is $8.19. Required: a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $145 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Complete this question by entering your answers in the tabs below. Required A Required B Required C How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Note: Enter all values as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required. Position Call (long) Put (short) Lending position Total Immediate CF Show less▲
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $145 per share for months, and you believe it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $145 is $8.19. Required: a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price of $145 if it is at the money? (The stock pays no dividends.) b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement? What is the most money you can make on this position? How far can the stock price move in either direction before you lose money? c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Complete this question by entering your answers in the tabs below. Required A Required B Required C How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? What is the net cost of establishing that position now? Note: Enter all values as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places. Leave no cells blank - be certain to enter "0" wherever required. Position Call (long) Put (short) Lending position Total Immediate CF Show less▲
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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Question
Transcribed Image Text:The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $145 per share for months, and you believe
it is going to stay in that range for the next 6 months. The price of a 6-month put option with an exercise price of $145 is $8.19.
Required:
a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month call option on C.A.L.L. stock at an exercise price
of $145 if it is at the money? (The stock pays no dividends.)
b. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement?
What is the most money you can make on this position? How far can the stock price move in either direction before you lose
money?
c. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at
expiration? What is the net cost of establishing that position now?
Complete this question by entering your answers in the tabs below.
Required A
Required B Required C
How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the
stock at expiration? What is the net cost of establishing that position now?
Note: Enter all values as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.
Leave no cells blank - be certain to enter "0" wherever required.
Position
Call (long)
Put (short)
Lending position
Total
Immediate CF
Show less ▲
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