Answered: All 4 options are written on the same…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2P: APT An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free...

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You buy a call with a strike price of $33 and sell an identical put. The call has a premium of $8.70 and the put has a premium of $5.53. You also sell a call with a strike price of $36 and buy an identical put. This call has a premium of $7.49 and this put has a premium of $7.17. The risk-free rate in the economy is 3.77%. All 4 options are written on the same underlying asset and expire in exactly one year. If the primary asset is worth $35.48 when the options all expire, what is your net percentage return?

Correct Answer is :- 0.0526

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