User Account

All Pages

What is the theoretical price of the 1-year

Assignment Help Finance Basics
Reference no: EM132473542

The S&P 500 spot level is 2,475. The 1-year at-the-money call on is selling at $140. The risk-free rate is 5% and the index pays a dividend yield of 3.5%. The S&P 500 options are European.

(a) What is the theoretical price of the 1-year at-the-money put price?

(b) The 1-year put is selling at $80 on the market, show how you can benefit from this arbitrage opportunity. Show all detail.

(c) If the S&P 500 options were American, will there be an arbitrage opportunity?

Reference no: EM132473542

Questions Cloud

What is the value of the shareholders equity : Wims, Inc., has current assets of $4,900, net fixed assets of $27,300, current liabilities of $4,100, and long-term debt of $10,200.
Determining the principal of the loan : The loan is for five years. When you make your first payment in one? month, how much of the payment will go toward the principal of the loan
Derermine the cost of raw material purchased in july : Chop shop manufacturing company, Derermine the cost of raw material purchased in july. prepare a cost of goods manufactured schedule for july 2016.
What is the optimal product mix : Bush Manufacturing has 31,000 labor hours available for producing M and N. What is the optimal product mix (how many M and N should be produced)
What is the theoretical price of the 1-year : What is the theoretical price of the 1-year at-the-money put price?
What is the compatible required rate of return : What is the compatible required rate of return on Japanese-yen cash flows?
What is a differential cost : After considering the differential revenues and costs associated with AM's possible expansion, is there a net cost or a net benefit to expanding?
What is the next dividend per share : Suppose you know a company's stock currently sells for $25 per share and the required return on the stock is 0.16. You also know that the required return
What is the current dividend per share : If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share? Answer with 2 decimals (e.g. 1.

Reviews

Write a Review

Finance Basics Questions & Answers

  What can be learned from the sbas creation

What can be learned from the SBA’s creation and the Internal Revenue Service’s subsidy of venture investing through SBICs?

  Discounted valuation of its projected dividends

If the risk-free rate is 3.4%, the market risk premium is 6%, and the company's beta is 1.1, what should the stock sell for today based on a discounted

  Maximum loan by an employee of a c corporation

Determine the maximum loan taken by an employee of a C corporation.

  Product Design and Quality Assignment

Product Design and Quality Assignment help and solutions:-what forces and important organizational activities enable a firm to build quality into its products?

  What did phillips record as equity income

If Phillips uses the Equity Income method, what did Phillips record as Equity Income on its 2007 income statement?

  Why do business enterprises require administered prices

Why do business enterprises require administered (stable) prices as opposed to highly flexible prices? How do business enterprises stabilize prices?

  How much must you deposit each year to reach your goal

(Solving for PMT of an annuity) To pay for your child's education, you wish to have accumulated $15,000 at the end of 15 years.

  Business valuation based on capital market analysis

A business valuation based on Capital market analysis for "Woodside Petroleum Limited" Part 1 (share trading and liquidity): information on the volume of trading and frequency of trading

  How much cash does the company have

Cash Equation. Sunset, Inc., has a book value of equity of $13,465. Long-term debt is $8,200. Net working capital, other than cash, is $2,275.

  What is the payback period

If the project is expected to produce cash flows of $50k in year 1, $51k in year 2, and $423k in year 3, what is the payback period.

  Shareholder model of corporate governance

Explain the major differences between the shareholder model of corporate governance and the stakeholder model of corporate governance?

  What would you do to offset the dividend increase

You do not need the extra dividend income, but you don't want to sell out. What would you do to offset the dividend increase?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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