How the listed variables impact the prices

Reference no: EM13324003

Mr. Curtis explaining how the listed variables impact the prices of call options and what the associated theory is behind each relationship:

Stock price
Risk-free rate
Exercise price
Stock volatility

It is also important to recognize if put-call parity conditions are being met; if not, an arbitrage opportunity exists for the firm. In the following situation, identify whether or not an arbitrage opportunity exists if

The call price = $1.15.
Exercise price = $22.50.
Time to expiration = 60 days.
Put price = $0.55.
Annual interest rate = 12%.
The stock pays 0 dividends.

Reference no: EM13324003

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