ook Fint rences Ken is interested in buying a European call option written on Southeastern Airlines,...

Transcribed Image Text:

ook Fint rences Ken is interested in buying a European call option written on Southeastern Airlines, Incorporated, a non-dividend-paying common stock, with a strike price of $80 and one year until expiration. Currently, the company's stock sells for $84 per share. Ken knows that, in one year, the company's stock will be trading at either $100 per share or $71 per share. Ken is able to borrow and lend at the risk-free EAR of 2 percent. a. What should the call option sell for today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the delta of the option? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., .16.) c. How much would Ken have to borrow to create a synthetic call? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. How much does the synthetic call option cost? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Call option price b. Delta of the option c. Amount to borrow d. Call option price ook Fint rences Ken is interested in buying a European call option written on Southeastern Airlines, Incorporated, a non-dividend-paying common stock, with a strike price of $80 and one year until expiration. Currently, the company's stock sells for $84 per share. Ken knows that, in one year, the company's stock will be trading at either $100 per share or $71 per share. Ken is able to borrow and lend at the risk-free EAR of 2 percent. a. What should the call option sell for today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the delta of the option? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., .16.) c. How much would Ken have to borrow to create a synthetic call? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. How much does the synthetic call option cost? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Call option price b. Delta of the option c. Amount to borrow d. Call option price