The table below provides the premiums for one-year European options on an underlying asset with a current spot price of 130. Strike Price Call Put 110 29.76 4.92 120 23.47 8.19 130 18.19 12.47 140 13.88 17.72 150 10.46 23.86 The continuously compounded risk-free annual rate of interest is 4.5%. Find the cost of a butterfly spread constructed from an at-the-money staddle and a 120-140 strangle. -8.99 O -0.97 O -8.59 O 0.97 8.59

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter5: Currency Derivatives
Section: Chapter Questions
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The table below provides the premiums for one-year European options on an underlying asset with a
current spot price of 130.
Strike Price
Call
Put
110
29.76
4.92
120
23.47
8.19
130
18.19
12.47
140
13.88
17.72
150
10.46
23.86
The continuously compounded risk-free annual rate of interest is 4.5%. Find the cost of a butterfly
spread constructed from an at-the-money staddle and a 120-140 strangle.
-8.99
-0.97
-8.59
O 0.97
8.59
Transcribed Image Text:The table below provides the premiums for one-year European options on an underlying asset with a current spot price of 130. Strike Price Call Put 110 29.76 4.92 120 23.47 8.19 130 18.19 12.47 140 13.88 17.72 150 10.46 23.86 The continuously compounded risk-free annual rate of interest is 4.5%. Find the cost of a butterfly spread constructed from an at-the-money staddle and a 120-140 strangle. -8.99 -0.97 -8.59 O 0.97 8.59
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