Suppose a European call option has the following features: So= $20, K=$15, T-3 months, r=10%. What...

Transcribed Image Text:

Suppose a European call option has the following features: So= $20, K=$15, T-3 months, r=10%. What is the minimum price of the call? Suppose the call is selling in the market for $2. Can you make profit in this circumstance, if so how? Show profit from your strategy. Consider that you are going to buy a put option on the following features: So-$37, $=42, r=5%, T-6 months. What is the minimum price you like to pay for the option? Suppose that the Put is selling in the market for $2. How can you make profit from this situation? Show stepwise process to calculate you profit or loss. Consider a European put option for non-dividend paying stock. The stock is currently selling for $35. The strike price is $40. The option matures in 3 months and the risk free rate of return is 10%. What is the minimum price you like to pay for the put option? Suppose the put is selling in the market for $3. How can you make profit from this situation? Show stepwise process. Suppose a European call option has the following features: So= $20, K=$15, T-3 months, r=10%. What is the minimum price of the call? Suppose the call is selling in the market for $2. Can you make profit in this circumstance, if so how? Show profit from your strategy. Consider that you are going to buy a put option on the following features: So-$37, $=42, r=5%, T-6 months. What is the minimum price you like to pay for the option? Suppose that the Put is selling in the market for $2. How can you make profit from this situation? Show stepwise process to calculate you profit or loss. Consider a European put option for non-dividend paying stock. The stock is currently selling for $35. The strike price is $40. The option matures in 3 months and the risk free rate of return is 10%. What is the minimum price you like to pay for the put option? Suppose the put is selling in the market for $3. How can you make profit from this situation? Show stepwise process.

Answer rating: 100% (QA)

Ans 1 The minimum price of a European call option is known as the intrinsic value The intrinsic value is the difference between the options strike price and the underlying assets current price with an... View the full answer