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Calculate the price of the portfolio

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Reference no: EM132971322

Question - A portfolio of European options on a stock consists of a bull spread of calls with strike prices 48 and 60 and a bear spread of puts with strike prices 48 and 60. You are given the following information about the stock and the options on this stock:

i) The current price of the stock is 50.

ii) The time to maturity of all options is one year.

iii) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 1%.

iv) The continuously compounded risk-free interest rate is 5%.

Required - Calculate the price of the portfolio.

Reference no: EM132971322

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