Calculate the price of at the money call

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Reference no: EM131928600

Shares of ANA Corp. are trading at $50. The stock does not pay dividends. The price of a three-month put with an exercise price of $50 is currently $4 (per share).

a. If the risk-free rate of interest is 10%, calculate the price of an “at the money” call (with a strike price also of $50)?

b. If you believe that ANA Corp. shares will continue to trade close to $50 for the next three months, what would be a simple options strategy using a put and a call to profit from your conviction? What is the most money you could make from it? How far can the stock move in either direction before you lose money?

Reference no: EM131928600

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