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Question: Assume that the stock price is $50 per share and the stock does not pay any dividend. The options are six-month European options and the exercise price of these options is $50 per share. The call price is $5 per share and the put price is $4.50 per share.

a) Using the put option, the call options, and the underlying stock, create a portfolio, which will let you lend $ 7,000 (face amount) for 6 months through the financial markets.

b) What is the rate of interest on the money that you lend in a). Give this rate per annum with continuous compounding.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92761668

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