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Intrinsic value of the call and the put options

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Reference no: EM132495005

A call option on a particular stock with a six-month maturity is currently priced at $9.96. The stock price is $62 and the call's exercise price is $60. The risk-free-rate is 6%/year and is compounded continuously. Using the information above, answer the following questions.

a. What is the value of a put option written on the same stock having the same maturity and exercise price?

b. What is the intrinsic value of the call and the put options?

c. What is the time (speculative) value of the call and the put options?

d. Suppose you are forming a portfolio consisting of a call and a put option as stated above. Such a portfolio is called a straddle. Is this portfolio risk free (hedged)? Show you results graphically or numerically.

Reference no: EM132495005

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