You are an options dealer who deals in non-publicly traded options. One of your clients wants to

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You are an options dealer who deals in non-publicly traded options. One of your clients wants to purchase a one-year European call option on HAL Computer Systems stock with a strike price of \($20.\) Another dealer is willing to write a one-year European put option on HAL stock with a strike price of \($20,\) and sell you the put option for a price of \($2.50\) per share. If HAL pays no dividends and is currently trading for \($18\) per share, and if the risk-free interest rate is 6%, what is the lowest price you can charge for the call option and still guarantee yourself a profit?

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Fundamentals Of Corporate Finance

ISBN: 9780137852581

6th Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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