The common stock of Triangular File Company is selling at $90. A 26-week call option written on

Question:

The common stock of Triangular File Company is selling at $90. A 26-week call option written on Triangular File’s stock is selling for $8. The call’s exercise price is $100. The risk-free interest rate is 10 percent per year.

(a) Suppose that puts on Triangular stock are not traded, but you want to buy one.

How would you do it?

(b) Suppose that puts are traded. What should a 26-week put with an exercise price of $100 sell for?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...