The cc risk free rate is 2.75%. The spot price of TFS is 33.25 and TFS pays a cc dividend of 1.0%. Here is a list of option prices for TFS options expiring in 6 months. Strike Price 30.00 32.50 40.00 Call Price 4.75 3.95 0.87 Which of the following portfolios guarantees an arbitrage profit of at least $0.05? a. Long C30, short P30, short C35, long P35. b. Long 0.75 C30, short C32.5, long 0.25 C40. c. Short 1 share of stock, long C32.5, short P32.55. Od. Long 0.75 P30, short P32.5, long 0.25 P40- Oe. Long 1 share of stock, short C32.5, long P32.5- Put Price 1.25 2.92 7.24
The cc risk free rate is 2.75%. The spot price of TFS is 33.25 and TFS pays a cc dividend of 1.0%. Here is a list of option prices for TFS options expiring in 6 months. Strike Price 30.00 32.50 40.00 Call Price 4.75 3.95 0.87 Which of the following portfolios guarantees an arbitrage profit of at least $0.05? a. Long C30, short P30, short C35, long P35. b. Long 0.75 C30, short C32.5, long 0.25 C40. c. Short 1 share of stock, long C32.5, short P32.55. Od. Long 0.75 P30, short P32.5, long 0.25 P40- Oe. Long 1 share of stock, short C32.5, long P32.5- Put Price 1.25 2.92 7.24
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter5: Financial Options
Section: Chapter Questions
Problem 5P
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