The put and call parity theorem

Assignment Help Financial Management

Reference no: EM131087968

The Put/Call Parity Theorem:

a. Is another name for the Interest Rate Parity Theorem.

b. Guarantees that an arbitrage situation will not occur in the price of puts and calls.

c. Relates the values of Put premiums and Call premiums to each other.

d. Is unrelated to the price of the underlying stock.

e. ALL of the above.

Reference no: EM131087968

Questions Cloud

What is the volatility of perfectly diversified portfolio : Portfolio diversification: A large number of stocks all have standard deviation of returns of ?i=40% per year. The pairwise correlation between the returns on any two stocks is ?ij=0.25. What is the volatility of a perfectly diversified portfolio?

What is the company expected returns and beta : CAPM: You are given the following information about a company. Its current value in the stock market is $255 Million. What is the company’s beta? What is the company’s expected returns? What is the company expected to be worth a year from now?

Bond currently sells-what is the duration of this bond : A bond currently sells for $1,050, which gives it an YTM of 6%. Suppose that if the yield increases by 25 bps, the price of the bond falls to $1,025. What is the duration of this bond?

Historical variance is sum of squared deviations divided : A person earned the following returns for the last four years: –30%, 40%, 15%, and 7%. Which is incorrect? Remember, the historical variance is the sum of the squared deviations divided by (n-1). c. The average return is 8%. d. The variance is 0.0839..

The put and call parity theorem : The Put/Call Parity Theorem

The firm realize if it adopts the lockbox system : Eagle Industries feels that a lockbox system can shorten its accounts receivable collection period by 4 days. Credit sales are $2,700,000 per year, billed on a continuous basis. What amount of cash will be made available for other uses under the lock..

Case on globalization : German consumer-goods maker Henkel AG is touting its new Gliss Restore & Refresh shampoo as the world's first hair-care product to address problems caused by the lack of ventilation under a head scarf, including split ends, itchy scalp and unpleasant..

Assume riskfree rate and dividend yield : You want to hedge against your portfolio value declining more than 10% in 1 year. Currently, the S&P500 is standing at 2,000 and your portfolio has a beta of 1.8. You need to purchase 1-yr S&P500 put options. Find the exercise price of the index put ..

How much collection float does the firm currently have : Float Simon Corporation has daily cash receipts of $64,000. A recent analysis of its collections indicated that customers’ payments were in the mail an average of 3 days. Once received, the payments are processed in 2.5 days. After payments are depos..

User Account

All Pages