Consider european-style call options on bond

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Reference no: EM131911716

Consider European-style call options on a bond. The options expire in 60 days. The bond is currently at $1.05 per $1 par and makes no cash payments during the life of the option. The risk free rate is 5.5%. Assume the contract is on $1 face value bonds. Calculate the lowest and highest possible prices for the options with exercise prices of (i) $0.95; and (ii) $1.10.

Reference no: EM131911716

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