Put-call parity-expiration date as the call option

Assignment Help Financial Management
Reference no: EM131056645

Put-Call Parity

The current price of a stock is $32, and the annual risk-free rate is 4%. A call option with a strike price of $32 and 1 year until expiration has a current value of $4.50. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option? Round your answer to the nearest cent.

$  

Reference no: EM131056645

Questions Cloud

Estimate of the common weibull shape parameter : Insulating fluid. The time to breakdown data in Table 6.1 of Chapter 6 yield the seven sets of linear estimates and variance and covariance factors below for parameters of an extreme value distribution for the In data.
Conducting the initial research : Do you think companies should partner with some of the locals to assist with their business ideas as they are conducting the initial research or simply send their own teams from home over into the desired country and let them conduct the research ..
Appropriate disciplinary action for the employees : Determine and explain the appropriate disciplinary action for the employees involved in this situation and identify motivational alternatives that can help turn the situation around;
Xplain the logic behind the use of your selected strategy : Assume you are on "the" management team for the organization you currently work for, one you used to work for, or one you'd like to work for. Discuss the PR campaign you would like to see implemented for this organization regarding an issue critic..
Put-call parity-expiration date as the call option : The current price of a stock is $32, and the annual risk-free rate is 4%. A call option with a strike price of $32 and 1 year until expiration has a current value of $4.50. What is the value of a put option written on the stock with the same exercise..
Constructed using the incremental benefit-cost analysis : A city engineer and economic development director of Buffalo are evaluating two sites for construction of a multipurpose sports arena. At the downtown site, the city already owns enough land for the arena. However, the land for construction of a park..
Contribute to the social welfare of the community : (a) What are the challenges inherent in running a business? (b) how can an entrepreneur contribute to the social welfare of the community in which his business operates?
Estimate the pressure head in metres at each pipe junction : The pressure head at point A is measured at 25 m (head of water). Assuming the network is situated on a level grade estimate the pressure head in metres at each pipe junction (B, C, D, E, F & G)
Use as the initial investment in fixed assets : Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7.5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent fac..

Reviews

Write a Review

Financial Management Questions & Answers

  Annuity payments-what will these equal payments be

(Annuity payments) Mr. Bill S. Preston, Esq. purchased a new house for $90,000. He paid $30,000 upfront and agreed to pay the rest over the next 20 years in 20 equal annual payments that include principal payments plus 11 percent compound interest on..

  What is the npv of investing in the new technology

Silver Bear Golf (SBG) is a manufacturer of top quality golf clubs with a specialty of putters. Currently, each putter they sell brings in $240 of revenue at a cost of $160. This past year, they sold 1,300 putters and they expect this number to grow ..

  What is current share price-earnings to fuel growth

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $12 per share dividend in 10 years and will..

  Cost of debt capital is lower than cost of equity capital

In general, the cost of debt capital is lower than the cost of equity capital. For this reason, it might be expected that firms with high debt ratios would have a lower weighted average cost of capital. Explain at least one reason why this is not the..

  An investment strategy is a set of rules

An investment strategy is a set of rules, behaviors, or procedures designed to guide an investor’s portfolio selections. The strategy is designed around the investor’s risk-return trade. Identify and discuss an investment strategy (rule, behavior, or..

  The payments are made monthly

You take out a 4 year car loan for $18,000. The loan has a 4% annual interest rate. The payments are made monthly. What are the monthly payments?

  How much will the bondholder gain or lose

A bondholder owns 15-year government bonds with a $5 million face value and a 6 percent coupon that is paid annually. The bonds are currently priced at $550,018.73 with a yield of 5.034 percent. The bonds have a duration of 10.53 years. If interest r..

  Par value with a coupon rate-debt of total capital

Micro Spinoffs, Inc., issued 10-year debt a year ago at par value with a coupon rate of 8%, paid annually. Today, the debt is selling at $1,160. The firm’s tax bracket is 35%. Micro Spinoffs also has preferred stock outstanding. The stock pays a divi..

  Using all of the least favorable variables at the same time

During a presentation where projects are being considered, an analyst runs a model using all of the least favorable variables at the same time, then, runs the model with the most favorable variables. We could call this

  The forward rate of the swiss franc

The forward rate of the Swiss franc is $.60. The spot rate of the Swiss franc is $.50. The following interest rates exist: U.S. Switzerland 360-day borrowing rate 7% 5% 360-day deposit rate 6% 4% You need to purchase SF 200,000 in 360 days. If you us..

  Require stead to ked your after-tax real yield

Several years ago, a Texas bank offered a thirty-year CD with an annual return indexed to inflation. The rate offered was the annual percentage increase in the CPI plus 4 percent. Show the after-tax real return you would earn, assuming that the infla..

  Earn an effective annual return on its consumer loans

Magnus Credit Corp. wants to earn an effective annual return on its consumer loans of 17.75 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers?

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