Difference between the prices of the strike call

Assignment Help Financial Management
Reference no: EM13950255

The current price of a stock is 50. The stock does not pay dividends. the continuously compounded risk free rate is 3%. six month call and put options on the stock are available at strikes of 45 and 48. The difference between the prices of the 48-strike put is .87. find the difference between the prices of the 45-strike call and the 48-strike call.

A. 1.87 B. 2.01 C. 2.09 D. 2.24 E. 2.33

Please, show work.

Reference no: EM13950255

Questions Cloud

What strategic alternatives would you suggest ikea : What strategic alternatives would you suggest IKEA employ to further penetrate the U.S. market?
Benchmark the performance of his small-cap stocks : A friend announces a plan to benchmark the performance of his small-cap stocks with the S&P 500. Which of the following concerns should dominate your thoughts?
Treasury bond to hold to maturity : If you invested in a long-term U.S. Treasury bond to hold to maturity, which form of risk should most concern you?
Design heat sink that will dissipate as much heat as : Design a heat sink that will dissipate as much heat as possible - if it is assumed that the base plate is kept at a constant temperature of 380K - Advantages and disadvantages of using CFD as opposed to other methods for this project.
Difference between the prices of the strike call : The current price of a stock is 50. The stock does not pay dividends. the continuously compounded risk free rate is 3%. six month call and put options on the stock are available at strikes of 45 and 48. The difference between the prices of the 48-str..
Calculate the environmental cost per pound for each product : Calculate the environmental cost per pound for each product. Which of the two appears to cause the most degradation to the environment?
Strongest of the species that survives : "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change."
Determine the steam quality at the turbine exit : For T 5 808F, determine the steam quality at the turbine exit, the steam mass flow rate, in lb/h, and the thermal efficiency. Plot the quantities of part (a) versus T ranging from   80 to 1058F.
Dna and the steps of protein synthesis : Describe the structure of DNA and the steps of protein synthesis. Describe the relationships between the following terms:

Reviews

Write a Review

Financial Management Questions & Answers

  What is the future value of these cash flows

Troy will receive $7,500 at the end of Year 2. At the end of the following two years, he will receive $9,000 and $12,500, respectively. What is the future value of these cash flows at the end of Year 5 if the interest rate is 8 percent?

  Determine actual implementation of their distribution policy

Which of the following help firms determine the actual implementation of their distribution policy? Which of the following uses is considered a good use of free cash flow? A company invests 15% of its FCF in marketable securities. This makes it diffi..

  Highest earning per share of ordinary share capital

Business is going well for David Johns Inc., the company that operates remote parking lots near major airports. The board of directors of this family-owned company believes that David Johns Inc. could earn an additional $1.5 million income before int..

  Earnings expectations play in quality of earnings

In Arthur Levitt's speech, referred to in the opening quote, he also said: "I fear that we are witnessing erosion in the quality of earnings and therefore, the quality of financial reporting.  What role does financial analysts' earnings expectations ..

  Bond portfolio against the following kinds of risk

Some Internet research may be required to answer this question, although it’s not absolutely necessary. What could you do to protect your bond portfolio against the following kinds of risk? A. Risk of an increasing interest rate B. Risk of inflation ..

  What inflation premium is built into five year bond yields

Crockett Corporation's 5-year bonds yield 6.35%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 3.50%, the default risk premium for Crockett's bonds is DRP = 1.00% versus zero for T-bonds, the liquidity premium on Crockett's bonds is..

  Demand for housing is often described being highly cyclical

The demand for housing is often described as being highly cyclical and very sensitive to housing prices and interest rates. Given these characteristics, describe the effect of each of the following in terms of whether it would increase or decrease th..

  Calculate the equivalent annual operating cost of machine

The operating cost of a new machine is $500 for the first year. Starting the second year, the operating cost increases by $200 per year for the next 10 years. Calculate the equivalent annual operating cost of the machine. What will be the present and..

  Estimate the value of common stock

Sooty Iron Works, Inc. has had declining sales and increasing expenses over the last decade and expects this trend to continue. As a result, the company predicts that earnings and dividends will decline indefinitely at a rate of 4 percent per year. S..

  How control weaknesses can lead to fraud

In your Discussion, you will be faced with a potentially fraudulent situation. This is something that you might face in your auditing career as well. How would you handle these types of difficult situations? As a new auditor, how would you respond to..

  What proportion of the firm does sarah currently own

Sarah Warren currently holds 400 shares of Nutri-Foods. The firm has 40,000 shares outstanding. the firm most recently had earnings available for common stockholders of $80,000 and its stock has been selling for $22 per share. What proportion of the ..

  What is the present value of an ordinary annuity

What is the present value of an ordinary annuity of $3,125 each year for nine years, assuming an opportunity cost of 13 percent?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd