Answer the following option problem A. The 6 month, 50 put price is $4. The...
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Accounting
Answer the following option problem
A. The 6 month, 50 put price is $4.
The stock price is $50.
If the interest rate = 5%, what should the call price be?
B. The 1 year 100 call price is $10. If the interest rate is 5%, and the stock price is 102, what should the 100 put price be?
C. If the stock price is $100, the interest rate is 5%, the call price is $5 and the put price is $6, is there an arbitrage?
What trades would you do to lock in a riskless profit?
D. In #C, how much money would you make?
E. If you bought 10 contracts (1 contract = 100 options ) of the 50 strangle for $8 (the cost of the put and call together was $8), and the stock was $55 at expiration, how much did you make or lose?
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