CornGrower is going to sell corn in one year. In order to lock in a fixed selling

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CornGrower is going to sell corn in one year. In order to lock in a fixed selling price, CornGrower buys a put option and sells a call option on each bushel, each with the same strike price and the same one-year expiration date.

The current price of corn is 3.59 per bushel, and the net premium that CornGrower pays now to lock in the future price is 0.10 per bushel.

The continuously compounded risk-free interest rate is 4%.

Calculate the fixed selling price per bushel one year from now.

(A) 3.49

(B) 3.63

(D) 3.74

(E) 3.84

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Authors: Ambrose Lo

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Question Posted: Nov 22, 2023 08:16 AM

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CornGrower is going to sell corn in one year. In order to lock in a fixed selling

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E To lock in a fixed selling price CornGrower enters into a short synthet...View the full answer

Derivative Pricing

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