Demonstrate an arbitrage opportunity

Assignment Help Finance Basics

Reference no: EM13298753

The price of a nondividend paying stock is $100 and the continuously compounded risk free rate is 5% (i.e. e^(.05*t)) A 1 year European Call option with a strike of $100 * e^.05*1 = $105.127 has a premium of $11.924. A 1.5 year European call option with a strike price of $100 * e^(.05*1.5) = $107.788 has a premium of $11.50.

Reference no: EM13298753

Questions Cloud

Why is wood more common in residential construction in us : why is wood more common in residential construction in the US and concrete more common in commercial construction

What is the frequency for given channel : TV-reception antennas for VHF (channels 2 through 13) are constructed with cross wires supported at their centers, What is the frequency for channel 4

What is your expected starting salary : Without considering the additional educational years or the time value of money, what is your expected starting salary as well as the standard deviation of that starting salary?

Find the apogee distance : An Earth satellite has a speed of 28100 km/hr when it is at its perigee, 281 km above Earth's surface. Find the apogee distance

Demonstrate an arbitrage opportunity : A 1 year European Call option with a strike of $100 * e^.05*1 = $105.127 has a premium of $11.924. A 1.5 year European call option with a strike price of $100 * e^(.05*1.5) = $107.788 has a premium of $11.50.

Draw an extended freebody diagram of this situation : A ladder weighs 150 N, is 5m long, and is leaning against a frictionless wall at an angle of 30* with the horizontal. Draw an extended freebody diagram of this situation

Alternative therapies by conventional practitioners : What are the potential obstacles to using complementary and alternative therapies by conventional practitioners? How could you, as a future nurse effect some changes in this area?

What is the after-tax preferred yield for selten : Buggy's tax rate is 0% due to continuing heavy tax losses, and Selten's tax rate is 34%. What is the after-tax preferred yield for Selten?

Explain move from single-melody chant to multiple melodies : Explain the move from the single-melody chant to multiple melodies sung or played at the same time (polyphony). Describe the stages of this development. Do you think that some radical monk started this movement? Explain why you think this move to pol..

User Account

All Pages