106k views
1 vote
The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $95 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $95 is $6.00. a. If the risk-free interest rate is 9% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $95 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.).3

User Pintxo
by
7.7k points

1 Answer

3 votes

Answer:

$ 8.02

Step-by-step explanation:

Solution

Given that:

The trading narrow range of the CALL corporation = $95

The range stay = 3 months

The price of a 3 month put option with a price exercise = $6.00

Risk free interest rate = 9%

Now

Recall the call put parity equation:

C = P + S - K x (1 + r)-T

= 6 + 95 - 95 x (1 + 9%)-3/12 = $ 8.02

Therefore the price he price of a 3-month call option on C.A.L.L. stock at an exercise price of $95 if it is at the money is $ 8.02

User Krzysztof Branicki
by
8.3k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories