What is the rate of interest that you receive on the money

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Stock price is $95 per share, exercise price of the options is $100 per share, all options are European and the stock does not pay any dividend. Option contracts are written on 100 shares of stock and mature in 3 months. The call price is $2 per share and the put price is $6 per share.

a. Use the put and call options and the underlying stock to create a portfolio which will be equivalent to lending $10,000 (face amount) for 3 months.

b. What is the rate of interest that you receive on the money that you have lent in. Give this rate per annum with continuous compounding.

Reference no: EM132036685

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