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What is the price of a one-year european put option

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Reference no: EM133021750

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Q1. The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6. The stock price is $51, the continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year. What is the price of a one-year European put option on the stock with a strike price of $50?

a. $9.91

b. $7.00

c. $6.00

d. $2.09

Q2. The advantage of a 'cap and collar' arrangement compared to an interest rate swap to hedge interest rate risk is:

a. It locks in an interest rate

b. It does not involve a dealer

c. It allows to take advantage of favourable price movements to a certain limit

d. All of the above

Reference no: EM133021750

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