1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
BARSIC [14]
3 years ago
13

You notice a european call and a european put on a stock have the same strike price and time to maturity on an options exchange.

At 10:00am on a certain day, the price of the call is $3 and the price of the put is $4. At 10:01am news reaches the market that has no effect on the stock price or interest rates, but decreases the volatility of the stock. As a result, the price of the call changes to $2.50.
1. If put-call parity holds, which of the following is correct?a. The put price increases to $4.50b. The put price decreases to $3.50c. The put price increases to $5.50d. Cannot be determined
Business
1 answer:
Ghella [55]3 years ago
8 0

Answer: b. The put price decreases to $3.50

Explanation:

Put - Call Parity refers to the relationship that a certain European Put has with a European Call of the same underlying asset, strike price, and expiration date.

If Put - Call Clarity holds then the options and the calls should move together when Volatility changes all else being equal.

In the above scenario, the price of the call DROPPED by $0.5 to $2.50.

This means that the Put Price must DROP AS WELL by $0.5 to $3.50 to maintain the Parity.

You might be interested in
$800 of supplies were purchased at the beginning of the month and the Supplies account was increased. As of the end of the perio
krok68 [10]

Answer:

a.Supplies expense would be debited for $600.

Explanation:

Assuming there is no opening Inventory:

End of period supplies balance = Opening balance  + purchases in the period - Expense for the period

200 = 0  + 800 - Expense for the period

Expense for the period = 800 - 200

Expense for the period = 600

So the correct option is a.Supplies expense would be debited for $600.

8 0
3 years ago
Par value is the dollar value that an investor must pay in order to purchase preferred stock.
Vesnalui [34]
I would say false. the par value is not necessarily the amount that the investor must pay in order to purchase the preferred stock. the par value is known to be the market price of the stock however, investors may offer the stock above or below the par value depending on the decision of the board
4 0
3 years ago
In doing a Kodak SWOT analysis, which of the following represents a traditional strength that the company leveraged into the new
lawyer [7]

Answer:

The correct answer is letter "D": R&D.

Explanation:

A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is a study of a firms' inner and outer advantages and disadvantages. In the case of the Eastman Kodak Company, mostly know just by Kodak, the strength that allowed the company to keep its operations up and running after the boom of photography digitizing is the importance they gave to investing in Research and Development (R&D). Before the 90s, Kodak made millionaire investments to develop technology in thermal printing in its picture maker kiosks.

6 0
4 years ago
The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced
mariarad [96]

Answer:

A) according to put call parity:

price of put option = call option - stock price + [future value / (1 + risk free rate)ⁿ]

put = $8.89 - $120 + [$120 / (1 + 8%)¹/⁴] = $8.89 - $120 +$117.71 = $6.60

B) you have to purchase both a put and call option ⇒ straddle

the total cost of the investment = $8.89 + $6.60 = $15.496, this way you can make a profit if the stock price increases higher than $120 + $6.60 = $126.60 or decreases below than $120 - $6.60 = $113.40

3 0
3 years ago
Identify a few examples of incentives that someone might encounter in his or her daily life. Instructions: In order to receive f
spin [16.1K]

Answer:

  • Receiving five cents for recycling glass bottles
  • Parking fines for illegal parking
  • Tax breaks for 401(k) retirement contributions checked

Explanation:

Recycling is good for the environment and also means companies spending less because they wouldn't have to reproduce the recycle material from scratch. Paying a person money for recycling the glass bottles is an incentive that is meant to encourage them to do it more.

Not all incentives are positive however. Some are negative and aimed at reducing a behavior. Fining people for illegal parking is an example as the logic is that the offending party will think of the fines the next time they want to park illegally and refrain from it.

Offering tax breaks to a person in order to get them to save is an incentive because they are being offered to keep more of their money if they save more.

4 0
3 years ago
Other questions:
  • When you arrange to pay a retainer for a lawyer, you are actually _____.
    8·1 answer
  • Due to heavy lobbying by the Cake Makers of America, the government issues a new regulation that requires people who sell cakes
    15·1 answer
  • Galaxy Co. distributes wireless routers to Internet service providers. Galaxy procures each router for $75 from its supplier and
    12·1 answer
  • In the BCG matrix, ________ are low-share businesses and products in a market that is not expected to grow. They may generate en
    14·1 answer
  • Which statement best describes an authoritarian style of communication
    5·1 answer
  • On January 1, 2018, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This included a $20,000 control premium. Carper r
    15·1 answer
  • The same person opens incoming mail and posts the accounts receivable subsidiary ledger.
    5·1 answer
  • A firm has issued $25 million in long-term bonds that now have 9 years remaining until maturity. The bonds carry a 9% annual cou
    11·1 answer
  • Volleyball helps people reach their fitness goals by __________. A. using teamwork to win B. improving balance and agility C. im
    13·2 answers
  • Your client and her husband agreed to split the following lifetime cash gifts: Total Gifts to Son Total Gifts to Daughter 2014 $
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!