Is there any arbitrage opportunities exist

Assignment Help Financial Management
Reference no: EM131996474

A stock currently sells for $31. A 3-month European call option on this stock with a strike price of $30 has a premium of $3. A 3-month European put option on the same stock with a strike price of $30 has a premium of $2.25. Assume a 10% annual continuously compounded risk-free interest rate.

Is there any arbitrage opportunities exist? If so, what are your arbitrage strategy and your profit in three months?

Reference no: EM131996474

Questions Cloud

Prepare the journal entries on first trust books on december : Vargo Corp. owes $308,000 to First Trust. The debt is a 10-year, Prepare the journal entries on First Trust's books on December 31, 2014, 2015, 2016
Calculate the intrinsic value of the call option : A stock is currently selling for $76 per share. You could purchase a call with a strike price of $70 for $8.
What is the arithmetic average return for these three years : Stock A exhibits the following yearly returns: Year 1 = 30%; Year 2 = -40%; Year 3 = 30%.What is the arithmetic average return for these three years?
Find the? p-value at an? alpha-level of alpha : Find the? p-value at an? alpha-level of alpha equals 0.01.
Is there any arbitrage opportunities exist : Is there any arbitrage opportunities exist? If so, what are your arbitrage strategy and your profit in three months?
Evidence to support the claim : A professor claims that the average of scores obtained by Mathematics majors is close to the average of scores obtained by the Computer Science majors.
What is the market risk premium : The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 an
Calculate the upper range of confindence interval : What is the 68%, 95%, and 99% confidence interval for this stock? (Show your answer to the nearest 3 decimals)
Average salary of substitute teachers in new york : A random sample of ten school districts is selected, and the daily salaries are shown. Is there evidence to support the claim at a = .05?

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the expected return for this risky portfolio

The following table provides information on two risky stocks that you think, given some special information, are good investments. The covariance between these two stocks is -.001. The expected return on the market is .15 with a standard deviation of..

  When the firms issue debt or equity in primary markets

bond market conditions do affect decisions about when the firms issue debt or equity in primary markets?

  Shares at the current market price

You are bearish on Telecom and decide to sell short 170 shares at the current market price of $70 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of ..

  Japanese company has bond outstanding

A Japanese company has a bond outstanding that sells for 92.1 par percent of its ¥1,000 par value.

  Why is it a concern to many financial market observers

What does this mean? Why is it a concern to many financial market observers? What role, if any, did it play in the financial crisis of the last decade? What, if anything, do you think should be done about it?

  Required return equal to the expected return

what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)?

  What is an estimate of barretts price per share

Barrett Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Barrett does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is in..

  Considering expanding its wine-making operations

Lakeside Grapes is considering expanding its wine-making operations.

  How much will he have available to spend on his vacation

How much will he have available to spend on his vacation?

  Correct concerning the rules related to project analysis

Which one of the following is correct concerning the rules related to project analysis?

  Example of external and internal horizontal diversification

Draw a value system for grocery industry. Post it on the board. Provide an example of external and internal horizontal diversification.

  Calculate the break-even after-tax salvage value

Calculate the amount of fund that will be freed up by the new project. Calculate the break-even after-tax salvage value.

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!

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