Essay
The following is a listing of option prices on Perdida Enterprises on December 12,2002:
The current stock price is 45.75,and the riskless rate is 7%.
a. Consider the following position: sell one January 40 call; buy two January 45 calls; sell one January 50 call. Evaluate the net cash flows on this position at expiration for different stock prices, and draw a payoff diagram.
b. Are the three January put options correctly priced relative to the corresponding call options? (Assume that there are 42 days on the January option.)
Correct Answer:
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a.
Net premium form the positions would ...View Answer
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Correct Answer:
Verified
Net premium form the positions would ...
View Answer
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