In a market, a share is traded at a spot price of SEK 803.20. Furthermore, the following call and put options are issued on the share, all with a term of one year: Call option 1 has an exercise price of SEK 840 and is traded for SEK 55.55. Sell option 1 has an exercise price of SEK 840 and is traded for SEK 52.35. Call option 2 has an exercise price of SEK 882 and is traded for SEK 44.44. Sell option 2 has an exercise price of SEK 882 and is traded for SEK 81.24. You need to borrow money and your bank offers an interest rate of 5.58% on deposit. Find out if the bank's interest rate is the most advantageous alternative or if you can instead use the options and the share to get a lower interest rate. Combine the positions in the list with answer alternatives that give the lowest interest rate for a loan of SEK 840.

 

a) A long position in the stock.

b)A long position in a call option 1.

c)A long position in a call option 2.

d)A long position in a put option 1.

e)A long position in a put option 2.

f)A loan of SEK 840 at the bank.

g)A short position in the stock.

h)A short position in a call option 1.

i)A short position in a call option 2.

j)A short position in a put option 1.

k)A short position in a put option 2.

Answer rating: 100% (QA)

To determine the most advantageous alternative for borrowing money we need to calculate the cost of ... View the full answer