Risk-free interest rate expressed as effective annual yield

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Reference no: EM131543909

FedEx is selling for $100 a share. A FedEx call option with one month until expiration and an exercise price of $109 sells for $2.40 while a put with the same strike and expiration sells for $11.25.

a. What is the market price of a zero-coupon bond with face value $109 and 1 month maturity? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Market price $

b. What is the risk-free interest rate expressed as an effective annual yield? In this case the interest rate = (Exercise price/Market price of the zero-coupon bond)^12-1. This is because the face value of the bond = exercise price and the effective annual yield can be calculated as (1 +monthly yield)^12-1. (Round your answer to 2 decimal places. Omit the '*%" sign in your response.) Risk-free interest rate $

Reference no: EM131543909

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