A stock is priced at 85 and six-month European call and put options on the stock are available. A 90-strike call is priced at 5.40 and a 95-strike call is priced at 3.82. A 90- strike put is priced at 9.44 and a 95-strike put is priced at 12.74. A portfolio is comprised of 1 long 90 strike call, 1 short 95-strike call, 1 short 90-strike put, and 1 long 95-strike put. If the force of interest is 5%, calculate the payoff on this portfolio after 6 months if the stock price is 92 at that time.

A stock is priced at 85 and six-month European call and put options on the stock are available. A 90-strike call is priced at 5.40 and a 95-strike call is priced at 3.82. A 90- strike put is priced at 9.44 and a 95-strike put is priced at 12.74. A portfolio is comprised of 1 long 90 strike call, 1 short 95-strike call, 1 short 90-strike put, and 1 long 95-strike put. If the force of interest is 5%, calculate the payoff on this portfolio after 6 months if the stock price is 92 at that time.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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