What to do to earn an arbitrage profit

Assignment Help Financial Management

Reference no: EM132039743

1. Suppose the price of a share of IBM stock is $200. An April call option on IBM stock has a premium of $5 and an exercise price of $200. The holder of the call option will earn a profit if the price of the share

A) increases to $204.

B) decreases to $190.

C) increases to $206.

D) decreases to $196.

E) None of the options are correct.

2. 1) Identify if there is any arbitrage opportunity and state what to do to earn an arbitrage profit

2) calculate arbitrage profit using the following information:

Stock price = 110

Call Price = 17

Put Price = 5

Risk free interest rate = 5%

Maturity for options = 1 year

Strike price for Put and Call: X = 105

Reference no: EM132039743

Questions Cloud

How much money have your parents paid for your education : Is college worth the money? Does education provide the most reliable path to upward social mobility? These questions are increasingly important today.

Pearson motors has target capital structure : Pearson Motors has a target capital structure of 30% debt and 70% common equity, with no preferred stock.

What percentage of the lots will be returned to the vendor : If in fact all of the rods in all of the lots received by the manufacturer are between 2.999 and 3.004 meters in length

Write about the prezi on social construction : Write a response on the reading - Topic: The Prezi on Social Construction, Oppression and Intersection. 2 page minimum

What to do to earn an arbitrage profit : Identify if there is any arbitrage opportunity and state what to do to earn an arbitrage profit.

What percentage of the lots received by the manufacturer : If in fact each lot has a mean length of 3 meters, what percentage of the lots received by the manufacturer will be returned to the vendor (i.e., the supplier)?

What is evanec percentage flotation cost : What is Evanec's percentage flotation cost, F? What is Evanec's cost of new common stock, re?

Write analysis of given essay on literature : Directions: For your final short essay, you are to write a literary analysis discussing either symbols or themes from one of the following short stories.

Explain the purpose of a business mission statement : Write Yes or No in each cell of your matrix to indicate whether you feel the particular mis-sion statement includes the respective component.

User Account

All Pages