Dr Nick

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About Dr Nick

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    Kaplan University
    Apr-2009 - Mar-2014

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    University of Santo Tomas
    Aug-2006 - Present

Category > Business & Finance Posted 11 Nov 2017 My Price 11.00

The price of a European call that expires in six months

The price of a European call that expires in six months and has a strike price of $50 is $5. The underlying stock price is $52, and a dividend of $1.00 is expected in three months. The term structure is flat, with all risk-free interest rates being 10%.

a. What is the price of a European put option on the same stock that expires in six months and has a strike price of $50?

b. Explain in detail the arbitrage opportunities if the European put price is $0.50. How much will be the arbitrage profit?

Answers

Dr Nick
(4)
Status NEW Posted 11 Nov 2017 11:11 AM My Price 11.00

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