Question: Please, can you answer the questions below ? Thank you! Urgent! Exam is tomorrow b. You pay 3.25 for a call option on Luther Industries

Please, can you answer the questions below ? Thank you! Urgent! Exam is tomorrow

Please, can you answer the questions below ? Thank you! Urgent! Exam

b. You pay 3.25 for a call option on Luther Industries that expires in three months with a strike price of 40.00. Three months later, at expiration, Luther Industries is trading at 41.00 per share. What is your profit per share on this transaction? Draw a prot diagram. [5 marks] c. Rose Industries is currently trading for 47 per share. The stock pays no dividends. A one- year European call option on Luther with a strike price of 45 is currently trading for 7.45. If the risk-free interest rate is 696 per year, then calculate the price of a oneyear European put option on Luther with a strike price of 45. [5 marks] cl. A stock's market price is 2.00. A 6 month at the money European put on the stock trades at 0.20. A 6 month at the money European call on the stock trades at 0.10. The continuously compounded risk-free rate is 10%. Assume transactions costs are zero. Discuss whether these prices imply the existence of an arbitrage opportunity. [8 marks] 8. Three six-month call options are traded on Noble stock: Exercise Price Call Option Price 90 5 100 11 110 15 How would you make money by trading in Noble options? Suggest a trading strategy and show the value and net prot of your position at various possible stock prices immediately prior to maturity. [12 marks]

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