You gather the following information from the Wall Street Journal: Intel's stock is selling for $17,...
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You gather the following information from the Wall Street Journal: Intel's stock is selling for $17, the risk-free rate is 3% and a put option on Intel is selling for $4.00 matures in one year and has an exercise price of $20. a. b. Calculate the equilibrium value of a call option on Intel that has an exercise price of $20 and matures in one year. You observe in the WSJ that the above call option is selling for $1.25. Is the market in equilibrium? If not, then create a pure arbitrage. (Hint to be a pure arbitrage you must show that there was zero net investment and a guaranteed profit.) You observe in the WSJ that the above call option is selling for $2.00. Is the market in equilibrium? If not, then create a pure arbitrage. (Hint to be a pure arbitrage you must show that there was zero net investment and a guaranteed profit.) You gather the following information from the Wall Street Journal: Intel's stock is selling for $17, the risk-free rate is 3% and a put option on Intel is selling for $4.00 matures in one year and has an exercise price of $20. a. b. Calculate the equilibrium value of a call option on Intel that has an exercise price of $20 and matures in one year. You observe in the WSJ that the above call option is selling for $1.25. Is the market in equilibrium? If not, then create a pure arbitrage. (Hint to be a pure arbitrage you must show that there was zero net investment and a guaranteed profit.) You observe in the WSJ that the above call option is selling for $2.00. Is the market in equilibrium? If not, then create a pure arbitrage. (Hint to be a pure arbitrage you must show that there was zero net investment and a guaranteed profit.)
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