Question: Consider a stock with current price S0 = 29 per share. A european call option on this stock that matures in T = 3 months
Consider a stock with current price S0 = 29 per share. A european call option on this stock that matures in T = 3 months with strike K = 30 costs PC = 2.9 per share. You are considering two ways to invest 58. Plan A is to buy 58 /29 = 2 shares of the stock and sell them in 3 months. Plan B is to buy 58/2.9 = 20 call options on the stock. If ST denotes the stock price per share in 3 months, Plan B has higher payoff
(a) for any ST > 0
(b) if ST < 29
(c) if 29 < ST < 30
(d) if ST > 30
(e) if ST > 33.33
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