Book edition 9th

Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus

Pages 748 pages

ISBN 9780078034695

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Short Answer

A call option on Jupiter Motors stock with an exercise price of $75 and one-year expiration is selling at $3. A put option on Jupiter stock with an exercise price of $75 and one-year expiration is selling at $2.50. If the risk-free rate is 8% and Jupiter pays no dividends, what should the stock price be?

Answer

$69.94

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Step by Step Solution

TABLE OF CONTENTS :

TABLE OF CONTENTS

Step 1: Given information

Call option Selling = C = $3.00

Exercise price =X = $75

Rate = r = 8%

Put option Selling = P = $2.50

Step 2: Calculation of the value of the put

Stock price = C + X / (1+r) ^t – P

=$3 + $75/ (1+8%)^1 - $2.50

=$69.94

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Essentials Of Investments

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Short Answer

Step by Step Solution

Step 1: Given information

Step 2: Calculation of the value of the put

Most popular questions for Business-studies Textbooks

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Select your language

Essentials Of Investments

Answers without the blur.

Short Answer

Step by Step Solution

Step 1: Given information

Step 2: Calculation of the value of the put

Most popular questions for Business-studies Textbooks

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