The current price of a stock is 50. The stock will pay a single dividend of 0.75
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The current price of a stock is 50. The stock will pay a single dividend of 0.75 in one month. The continuously compounded risk-free interest rate is 6%.
The following table shows the premiums of 6-month European call options on the stock:
Let S be the price of the stock six months from now.
Determine the range of values of S such that a long 50-60 6-month European bear spread outperforms (in terms of profit) a long 50-60 6-month European collar.
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Without loss of generality why we may assume that the 5060 bear spread is constructed ...View the full answer
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