Table 2.7Corn futures priceson the ChicagoMercantile Exchange,January 3, 2019MaturityMar-19May-19Jul-19Last Change High3.8025 0.7500 3.8075 3.79753.88000.5000 3.8800 3.87503.9500 0.25003.95253.94500.00003.97003.96504.0075 -0.5000 4.01004.00254.10004.0950Sep-19 3.9700Dec-19Mar-20 4.0975 0.0000Low The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $105 per share for months, and you believeit is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $105 is $12.86.a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of$105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimalplaces.)Price of a 3-month call option

Using put call parity formula we can determine the price of a call option. The put-call parity…

a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of a 3-month call option

a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of a 3-month call option

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $85 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 $85 is $8.00. 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 $85 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…
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $135 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 $135 is $10.70. 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 $135 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…
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