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
3241004551 [841]
3 years ago
13

The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6. The stock price is $51, the

continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year. Using the put-call parity, compute the price of a one-year European put option on the stock with a strike price of $50. Please show your work.
Business
1 answer:
klemol [59]3 years ago
4 0

Answer: 2.09

Explanation:

Given the following ;

Strike price (K) = $50

Price (c) = $6

Rate (r) = 6% = 0.06

Stock price (So) = $51

Time (T) = 1

Recall, relation for a put-call parity(p) is given by:

p + So = c + Ke^-(rT)

p = c + [Ke^-(rT)] - So

p = 6 + [50e^-(0.06 × 1)] - 51

p = 6 + [50×e^-0.06] - 51

p = 6 + (50 × 0.9417645) - 51

p = 6 + 47.0882267 - 51

p = 53.0882267 - 51

p = 2.0882267

p = 2.09

You might be interested in
Dairy Days Ice Cream sells ice cream cones for​ $5 per customer. Variable costs are​ $2 per cone. Fixed costs are​ $2100 per mon
qwelly [4]

Answer:

0.6 or 60%

Explanation:

The contribution margin ratio is calculated by the formula below.

Contribution margin ratio = <u>contribution margin</u>

     sales revenue

= For Dairy D's

Contribution margin per unit = sales - variable expenses

=$5-$2

= $3 per unit

Contribution margin = <u>Contribution  margin per unit</u>

    sale price per unit

   =3/5

   =0.6 or 60%

4 0
3 years ago
Is it against the law to require a student to pay their own money to go on a trip that will affect grade?
Montano1993 [528]
No because if the teacher wants to bump up that grade they can if they want
7 0
3 years ago
Select all that apply. Select the items that describe what most likely happens when the Federal Reserve increases the money supp
11111nata11111 [884]

Answer:

Businesses borrow more money.

Consumption increases.

Explanation:

The Federal Reserve is the body responsible for conducting monetary policy in the US. Monetary policy basically consists of two actions. The increase / decrease in the money supply in the economy and the increase / decrease in the interest rate. These actions may happen together, but they are technically independent.

When the Federal Reserve increases the supply of money in circulation, more money is circulated through loans and personal spending. This is considered a policy of stimulating the economy and can be done independently of interest rate changes, although the reduction of interest is also a stimulus monetary policy that can be done in conjunction with the increase in the money supply.

5 0
3 years ago
Hollywood shoes would like to maintain their cash account at a minimum level of $51,000, but expect the standard deviation in ne
Svet_ta [14]
1> $55,100

2>$72,328.32

3>$111,859.83

4>$74,575.50


3 0
3 years ago
In general, a larger R-squared tends to suggest that
Scilla [17]

Answer:

d. the estimated slope coefficient is more likely to equal the population slope coefficient.

Explanation:

R squared is a statistical measure that measures the closliness of data from regression line. in general a large r squared tends to suggest that the estimated slope coefficient is more likely to equal the population slope coefficient.

5 0
3 years ago
Read 2 more answers
Other questions:
  • Rowland Perry, a headhunter in Manhattan, is required to find a capable candidate for the position of creative director for an a
    14·1 answer
  • Crede Company budgeted selling expenses of $30,300 in January, $34,500 in February, and $40,300 in March. Actual selling expense
    5·1 answer
  • Multinational enterprises (MNEs) have an impact far beyond their firm boundaries. Assume you are working for a small firm that s
    12·1 answer
  • What is not one of the five main catogories of risk faced by individuals?
    11·1 answer
  • Over time, members of the supply chain often formalize their relationship by entering into contracts that dictate various terms,
    15·1 answer
  • Romo Enterprises needs someone to supply it with 127,000 cartons of machine screws per year to support its manufacturing needs o
    8·1 answer
  • You would like to buy a house that costs $ 350 comma 000. You have $ 50 comma 000 in cash that you can put down on the​ house, b
    5·1 answer
  • In a market economy, decisions about which goods are produced are based on:
    11·1 answer
  • Economically, a "want" is something __________.
    8·1 answer
  • if the company now purchases office equipment on account for $20,000, the accounting equation will change to:
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!