In-Class Exercise 9
In-Class Exercise 9
In-Class Exercise 9
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3. Curley buys a one-year 50-strike European call option from Moe for a premium of $7.43.<br />
The risk-free interest rate is 6.5% effective. For what spot price at expiration is Moe’s<br />
profit 0?<br />
4. Arnold buys a one-year 125-strike European call for a premium of $16.86. He also sells a<br />
100-strike call on the same underlying asset for a premium of $31.93. The spot price at<br />
expiration is $110. The effective annual interest rate is 3.5%. What is Arnold’s total profit<br />
at expiration for the two options?<br />
5.We are given the following information about derivatives for a certain underlying asset:<br />
Forward price = $163.13<br />
150-strike European call premium = $23.86<br />
150-strike European put premium = $11.79<br />
The risk-free annual effective rate of interest is X. Determine X.<br />
2
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