(a) Assume that the risk-free interest rate is 3% (annual), and there is a stock with current...
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(a) Assume that the risk-free interest rate is 3% (annual), and there is a stock with current value S(0) = 200. Is it possible to find an arbitrage opportunity if the forward price of stock is F = 203.50 with delivery date 1 year? If yes, explain how you would make a riskless profit.
(b) Assume again that the risk-free interest rate is 3% (annual), and there is a stock with current value S(0) = 200. Suppose that the price of a call option (for this stock) with exercise time T = 1 year is 10, and the price of a put option (for the same stock, same exercise time) is 8. The two options also have the same strike price. What is it?
Related Book For
Financial reporting, financial statement analysis and valuation a strategic perspective
ISBN: 978-0324789416
7th Edition
Authors: James M Wahlen, Stephen P Baginskl, Mark T Bradshaw
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