You buy a share of stock, write a one-year call option with X = $12, and buy a one-year put option with X = $12. Your net outlay to establish the entire portfolio is $11.50. What must be the risk-free interest rate? The stock pays no dividends.
1 answer
Question:
You buy a share of stock, write a one-year call option with X = $12, and buy a one-year put option with X = $12. Your net outlay to establish the entire portfolio is $11.50. What must be the risk-free interest rate? The stock pays no dividends.
Answers
Answer:4.35%Explanation:You buy a share of stock, write a one-year call option with X = $12, and buy a one-year put option with X = $12. Your net outlay to establish the entire portfolio is $11.50. What must be the risk-free interest rate? The stock pays no dividends.Given the following :1 - year call option with X = $121- year put option with X = $12Net outlay to establish portfio = $11.50No dividendRisk-free interest rate :(X / net outlay) - 1(12 / 11.50) - 11.0434782 - 1= 0.0434782Expressing as a percentage :0.0434782 * 100= 4.347%=4.35%
Similar Solved Questions
2 answers
Can someone help me answer this? i need the answer asap.
can someone help me answer this? i need the answer asap....
2 answers
Rembrandt created many versions of his self-portrait, sketching, etching or painting himself more than one hundred times. If you were to create a self-portrait, how would you picture yourself? What setting would you choose? What facial expression? What artistic techniques would you use? What medium would you choose? (paint, pencil, chalk, collage, etc.) Would you use props to show special interests? Remember, a self-portrait not only lets people see your physical features, it also lets people kn
Rembrandt created many versions of his self-portrait, sketching, etching or painting himself more than one hundred times. If you were to create a self-portrait, how would you picture yourself? What setting would you choose? What facial expression? What artistic techniques would you use? What medium ...
2 answers
What are the solutions of the system 7x + 3y = -3 and y = -2 x ? (-1, 0) and (-8, 3) (0, -1) and (3, -8) (-1, 0) and (0, -1) (-8, 3) and (3, -8)
What are the solutions of the system 7x + 3y = -3 and y = -2 x ?
(-1, 0) and (-8, 3)
(0, -1) and (3, -8)
(-1, 0) and (0, -1)
(-8, 3) and (3, -8)...
1 answer
During 1906 and 1907, what two methods did the Forest Service use to protect the Kaibab deer?
During 1906 and 1907, what two methods did the Forest Service use to
protect the Kaibab deer?...
2 answers
Which would best explain why the production of transgenic plants may be harmful? A. They are used in the production of rare medicines B. They contain vital nutrients C. They reproduce rapidly D. They produce natural insecticides which could kill beneficial insects
Which would best explain why the production of transgenic plants may be harmful?
A. They are used in the production of rare medicines
B. They contain vital nutrients
C. They reproduce rapidly
D. They produce natural insecticides which could kill beneficial insects...
2 answers
What is the name of the labor system that developed throughout the South after the Civil War kept poor blacks and white working in agriculture? antebellum indenturing sharecropping convict lease system
What is the name of the labor system that developed throughout the South after the Civil War kept poor blacks and white working in agriculture?
antebellum
indenturing
sharecropping
convict lease system...
1 answer
Since there are mudslides within Pismo Beach along the Pacific Coast Highway during your drive from Los Angeles to San Francisco, you head north on I-5 to reach San Francisco. Although the odds of a mudslide being substantially reduce, higher traffic on I-5 increases the risk of a motor vehicle accident. Since risk is always present, which of the following condition is taking place? A. Denying the risk B. Sharing the risk C. Avoiding risk altogether D. Accepting the risk
Since there are mudslides within Pismo Beach along the Pacific Coast Highway during your drive from Los Angeles to San Francisco, you head north on I-5 to reach San Francisco. Although the odds of a mudslide being substantially reduce, higher traffic on I-5 increases the risk of a motor vehicle acci...
1 answer
Mitosis is best described as: O nuclear division that ensures each daughter cell has the same genes and chromosomes as the parent cell O daughter cells that have the same chromosomes as the partent cells O nuclear division that reults in meiosis and chromosomal equity O nuclear dividion that results in daughter cells that have twice the number of chromosomes as the parent cells O cell division where the daughter cells are the same as the parents cells
Mitosis is best described as:
O nuclear division that ensures each daughter cell has the same genes and chromosomes as the parent cell
O daughter cells that have the same chromosomes as the partent cells
O nuclear division that reults in meiosis and chromosomal equity
O nuclear dividion that results...
1 answer
What do lunar and solar eclipses have in common ?
what do lunar and solar eclipses have in common ?...
1 answer
Gamma-ray bursters are objects in the universe that emit pulses of gamma rays with high energies. The frequency of the most energetic bursts has been measured at around 3.0 × 1021 Hz. The speed of light is 3 × 108 m/s. What is the wavelength of these gamma rays? Answer in units of m
Gamma-ray bursters are objects in the universe that emit pulses of gamma rays with high energies. The frequency of the most energetic bursts has been measured at around 3.0 × 1021 Hz. The speed of light is 3 × 108 m/s. What is the wavelength of these gamma rays? Answer in units of m...
1 answer
Term used to describe having height, width, and depth?
Term used to describe having height, width, and depth?...
1 answer
Our family always have a fleeting idea of going to Phunet Thailand but we know it will take some time given the present health crisis
our family always have a fleeting idea of going to Phunet Thailand but we know it will take some time given the present health crisis...
1 answer
How does goverment respond to the needs of those people who belong to the same social location where you are located right now?
how does goverment respond to the needs of those people who belong to the same social location where you are located right now?...
1 answer
How can this be solved? (With explanation please.) Sorry about the writing and marks.
How can this be solved? (With explanation please.) Sorry about the writing and marks....
1 answer
Which of the following inventions helped aid the political and religious reform movements of the 15th century? A.) stereotype B.)Gutenberg Press C.) linotype D.) hot press
Which of the following inventions helped aid the political and religious reform movements of the 15th century?
A.) stereotype
B.)Gutenberg Press
C.) linotype
D.) hot press...
1 answer
5 Draw a ball-and-socket joint. Add two labels to your drawing to show two things which help bones turn smoothly.
5 Draw a ball-and-socket joint. Add two labels to your drawing to show two things which help bones turn smoothly. ...
1 answer
Where would you like to make the greatest contribution?
Where would you like to make the greatest contribution?...
1 answer
What is the simplified value of the exponential expression??16[tex] \frac{1}{4} [/tex]
What is the simplified value of the exponential expression??16[tex] \frac{1}{4} [/tex] ...