1 suppose the price of a share of ibm stock is 200 an april, Ask an Expert

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1. Suppose the price of a share of IBM stock is $200. An April call option on IBM stock has a premium of $5 and an exercise price of $200. The holder of the call option will earn a profit if the price of the share

A) increases to $204.

B) decreases to $190.

C) increases to $206.

D) decreases to $196.

E) None of the options are correct.

2. 1) Identify if there is any arbitrage opportunity and state what to do to earn an arbitrage profit

2) calculate arbitrage profit using the following information:

Stock price = 110

Call Price = 17

Put Price = 5

Risk free interest rate = 5%

Maturity for options = 1 year

Strike price for Put and Call: X = 105

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92876392

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