PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 20, Problem 16PS
Put–call parity The common stock of Triangular File Company is selling at $90. A 26-week call option written on Triangular File’s stock is selling for $8. The call’s exercise price is $100. The risk-free interest rate is 10% per year.
- a. Suppose that puts on Triangular stock are not traded, but you want to buy one. How would you do it?
- b. Suppose that puts are traded. What should a 26-week put with an exercise price of $100 sell for?
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Students have asked these similar questions
A4)
Suppose that the price of a stock today is at $25. For a strike price of K = $24
a 3-month European call option on that stock is quoted with a price of $2, and a 3-month
European put option on the same stock is quoted at $1.5 Assume that the risk-free rate is 10%
3.
per annum.
(a) Does the put-call parity hold?
The common stock of Triangular File Company is selling at $91. A 13-week call option written on Triangular File's stock is selling for $9.
The call's exercise price is $101. The risk-free interest rate is 8% per year.
a. Suppose that puts on Triangular stock are not traded, but you want to buy one. Which combination will produce the same results?
Buy call, invest PV(EX), sell stock short
Sell call, invest PV(EX), sell stock short
Buy call, lend PV(EX), buy stock
Sell call, lend PV(EX), buy stock
b. Suppose that puts are traded. What should a 13-week put with an exercise price of $101 sell for? (Do not round intermediate
calculations. Round your answer to 2 decimal places.)
Put option price
Chapter 20 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 20 - Vocabulary Complete the following passage: A _____...Ch. 20 - Option payoffs Note Figure 20.12 below. Match each...Ch. 20 - Option payoffs Look again at Figure 20.12. It...Ch. 20 - Option payoffs What is a call option worth at...Ch. 20 - Option payoffs The buyer of the call and the...Ch. 20 - Option combinations Suppose that you hold a share...Ch. 20 - Option combinations Dr. Livingstone 1. Presume...Ch. 20 - Option combinations Suppose you buy a one-year...Ch. 20 - Option combinations Suppose that Mr. Colleoni...Ch. 20 - Option combinations Option traders often refer to...
Ch. 20 - Prob. 11PSCh. 20 - Option combinations Discuss briefly the risks and...Ch. 20 - Put-call parity A European call and put option...Ch. 20 - Putcall parity a. If you cant sell a share short,...Ch. 20 - Putcall parity The common stock of Triangular File...Ch. 20 - Put-call parity What is put-call parity and why...Ch. 20 - Putcall parity There is another strategy involving...Ch. 20 - Putcall parity It is possible to buy three-month...Ch. 20 - Putcall parity In April 2017, Facebooks stock...Ch. 20 - Option bounds Pintails stock price is currently...Ch. 20 - Option values How does the price of a call option...Ch. 20 - Option values Respond to the following statements....Ch. 20 - Option values FX Bank has succeeded in hiring ace...Ch. 20 - Option values Is it more valuable to own an option...Ch. 20 - Option values Youve just completed a month-long...Ch. 20 - Option values Table 20.4 lists some prices of...Ch. 20 - Option bounds Problem 21 considered an arbitrage...Ch. 20 - Prob. 30PSCh. 20 - Prob. 31PSCh. 20 - Prob. 32PS
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