Use the option quote information shown here to answer the, Ask an Expert

Finance

Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $78.

Call Put

Option Expiration strike price Vol. Last Vol. Last

RWJ Mar 72 248 5.00 178 5.10

Apr. 72 188 10.85 145 9.85

Jul. 72 157 11.70 61 13.55

Oct. 72 78 12.60 29 12,25

a-1 Are the call options in or out of the money?

a-2 What is the intrinsic value of an RWJ Corp. call option? Intrinsic value $ --------------------

b-1 Are the put options in or out of the money?

b-2 What is the intrinsic value of an RWJ Corp. put option? Intrinsic value $ ------------------------

c-1 Two of the options are clearly mispriced. Which ones?

c-2 What is the arbitrage profit you could make on each of the mispriced options? (Round your answers to 2 decimal places, e.g., 3 2.16.)

Mispriced option Profit

Mar call $ --------------------------

Oct Put $ -----------------------------

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92879661

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