DEF stock currently trades at $112. Use the chart for the questions. Call Premiums Put Premiums Strike Jan. Feb. Jan. Feb. 105 7.50 7.75 .50 .60 110 6.25 6.50 .65 .75 115 1.15 1.20 3.25 3.62 120 .75 .95 8.10 8.85 1. What is...

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Finance

DEF stock currently trades at $112. Use the chart for thequestions.
Call Premiums
Put Premiums
Strike
Jan.
Feb.
Jan.
Feb.
105
7.50
7.75
.50
.60
110
6.25
6.50
.65
.75
115
1.15
1.20
3.25
3.62
120
.75
.95
8.10
8.85
1. What is the exercise value of the 115 Feb. put option? Roundintermediate steps to four decimals and your final answer to twodecimals. Do not use currency symbols or words when entering yourresponse.
2. Assuming that the annual risk-free rate is 5% and the timeuntil expiration is 6 months, an investor could earn an arbitrageprofit by shorting a synthetic 110 Jan. put option and buying a 110Jan. put option in the marketplace.
a. true
b. false
3. Suppose that you decided to set up a short strip positionusing the Jan. 105 options. Find your profit/loss if the stocktrades for $110 when the options expire. Round intermediate stepsto four decimals and your final answer to two decimals.
$350
4. Suppose that you decided to set up a long strap positionusing the Feb. 110 options. Find your profit/loss if the stocktrades for $127 when the options expire. Round intermediate stepsto four decimals and your final answer to two decimals.
$2,025
I've bolded the answers I got and I would just like to check mywork. Thank you!

Answer & Explanation Solved by verified expert

4.0 Ratings (805 Votes)

1 As per the table the exercise value of 115 Feb Put Option is 362 2 Synthetic 110 Jan Put Option Buy Stock and Sell Call Option Synthetic 110 Jan Put Option 112 625 See Answer

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	Call Premiums	Put Premiums
Strike	Jan.	Feb.	Jan.	Feb.
105	7.50	7.75	.50	.60
110	6.25	6.50	.65	.75
115	1.15	1.20	3.25	3.62
120	.75	.95	8.10	8.85