Interest rates are zero. A European call with a strike price of $50 and a maturity of one year is worth $6 . A European put with a strike price of $50 and a maturity of one year is worth $7 . The current stock price is $49
Which of the following is true?
A. The call price is high relative to the put price
B. The put price is high relative to the call price
C. Both the call and put must be mispriced
D. None of the above
D
In this case because interest rates are zero c+K=p+S0 . The left side of this equation is 50+6=56 . The right side is 49+7=56 . There is no mispricing.
You might also like to view...
Operating income percentage is determined by the following process:
a. Divide departmental cost of goods sold by departmental net sales. b. Divide departmental net sales by departmental operating income. c. Divide departmental operating income by departmental net sales. d. Divide departmental net sales by departmental net profit. e. Divide departmental contribution margin by net sales.
A mobile phone manufacturing company is said to functionally modify one of its products if it:
a. introduces a sleek and stylish version of the mobile phone with the same specifications. b. reduces the price of the mobile phone ahead of a sale. c. introduces stylish headphones for the mobile phone. d. releases a software update to fix the mobile phone's heating problem.
Big data and big data analytics are likely being used in all of the following industries except:
a. Agriculture b. Retail c. Cloud-based services d. There are very few industries (if any) that are not using big data and big data analytics in some way
The primary function of an actuary is to
A) adjust claims. B) determine premium rates. C) negotiate reinsurance treaties. D) invest insurance company assets.