LOL Ltd has a current share price of $52. A put option written on LOL, which has

Fantastic news! We've Found the answer you've been seeking!

Question:

LOL Ltd has a current share price of $52. A put option written on LOL, which has a strike price has $55 and 8 months to expiry, is trading at $5.34.

If the risk-free rate of interest is 7% pa (continuously compounded), what is the correct price for a call option on LOL with $55 strike price and 8 months to expiry?

Related Book For answer-question

Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

See More Books

Posted Date: Aug 20, 2022 01:01 AM

See More Questions

An electronic chess game has a useful life that is exponential with a mean of 30 months. Deter-mine each of the following: a. The probability that any given unit will operate for at least (1) 39...
A corporate project requires an initial investment of $2.5 million today and is expected to generate after-tax cash flows of $800,000 at the end of years 1-5. The project has a minimum required...
A corporate project requires an initial investment of $2 million today and is expected to generate after-tax cash flows of $750,000 at the end of year 1, $1,000,000 at the end of year 2, and...
describe Jarir bookstore by providing the followings: - A brief introduction regarding the history of this brand and its main activity? - Describe how and why the brand's activity has evolved through...
A gas mixture of 1 kmol carbon monoxide, 1 kmol nitrogen, and 1 kmol oxygen at 25C, 150 kPa, is heated in a constant pressure process. The exit mixture can be assumed to be in chemical equilibrium...
Wendy works at a fast-food restaurant. When her wage rate was $5 per hour, she worked 30 hours per week. When her wage rate rose to $6 per hour, she decided to work 40 hours. But when her wage rate...
The case of flow past a cylinder of infinite length normal to the axis was also studied by Stokes. In view of the 2D nature of the problem, it is more convenient to work in $r, \theta$ coordinates....
Calculate financial leverage measures. The following information was available for the year ended December 31, 2013: Earnings before interest and taxes (operating income) ....... $60,000 Interest...
Type out the correct answer ASAP with proper explanation . Thank you . 1.Explain Ricardo's theory of distribution. 2.Explain and show graphically the relationship between rent and prices.
You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designer's silk ties. The company has an exclusive franchise on the distribution of the ties,...
Consider a single server queue system (e.g., a food truck). It follows a FIFO (First-In and First-Out) rule and let consider the time frame from t = 0 to t = 10 at this case. Customers' arrivals and...
As of June 30, Year 1, the bank statement showed an ending balance of $16,760. The unadjusted Cash account balance was $16,392. The following information is available: 1. Deposit in transit, $2,950....
Department S had 500 units 60% completed in process at the beginning of the period, 9,000 units completed during the period, and 600 units 30% completed at the end of the period. What was the number...
Department R had 5,000 units in work in process that were 75% completed as to labor and overhead at the beginning of the period; 30,000 units of direct materials were added during the period; 32,000...
[1] The triceps muscle in the back of the upper arm extends the forearn This muscle in a professional boxer exerts a force of 2000 N with an effective perpendicular lever arm of 3.00 cm, producing an...
A neon sign is made from 5.2 m of glass tubing of diameter 2.0 cm. The pressure required for the proper operation of the sign at 310 K is 1.5 mmHg. Find the mass of neon required to fill the sign.
So Long Loadshedding? For the first time in history, the entire South Africa may be lit up. Eskom has never been able to provide power to 100% of the population. And while the state-owned enterprise...
(a) How far away can a human eye distinguish two ear headlights 2.0 m apart? Consider only diffraction effects and assume an eye pupil diameter of 5.0 mm and a wavelength of 550 nm. (b) What is the...
The Safety Razor Company has a large tax-loss carry forward and does not expect to pay taxes for another 10 years. The company is therefore proposing to lease $100,000 of new machinery. The lease...
True or false? Explain or qualify as necessary. a. Investors demand higher expected rates of return on stocks with more variable rates of return. b. The CAPM predicts that a security with a beta of 0...
What does the efficient-market hypothesis have to say about these two statements? a. I notice that short-term interest rates are about 1 percent below long-term rates. We should borrow short-term. b....
solve the given problem using PSO method \[f(X)=1200\left(2 x_{1} x_{3}+2 x_{2} x_{3} ight)+2500 x_{1} x_{2}+500\left(\frac{1000}{x_{1} x_{2} x_{3}} ight)+100\left(\frac{1000}{10 x_{1} x_{2} x_{3}}...
Show 3 iterations for solving the problem below \[\min f(X)=-12 x_{1}-7 x_{2}+x_{2}^{2}\] subject to $-2 x_{1}^{4}-x_{2}+2=0$ \[0 \leq x_{1} \leq 3,0 \leq x_{2} \leq 3\]
Solve the optimization problem using SA \[\min f(X)=100\left(x_{1}^{2}+x_{2} ight)^{2}+\left(1-x_{1} ight)^{2}\] subject to $X \in[0,7]$

LOL Ltd has a current share price of $52. A put option written on LOL, which has

Question:

Expert Answer:

Answer Answer Current share price 52 strike price ... View the full answer

Principles of Corporate Finance

Students also viewed these physics questions