J-Rata Corp shares are currently trading at $30 each. It is expected to increase by 10% or decrease by 6% during the next two-three months. If its strike price at maturity in six months is set as $32 and the risk free rate is 8% per annum for all maturities:(a) Calculate its call options price and its put option price currently(b)Test and prove that the put-call parity is holding based on your option pricing.

Solution- So=$30 Strike price (k)=$32 Risk free rate=8% (per anum) q=(e^0.08*3/12) -0.94/ (1.1-0.94)…

Answered: J-Rata Corp shares are currently…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 7P

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J-Rata Corp shares are currently trading at $30 each. It is expected to increase by 10% or decrease by 6% during the next two-three months. If its strike price at maturity in six months is set as $32 and the risk free rate is 8% per annum for all maturities:

(a) Calculate its call options price and its put option price currently

(b)Test and prove that the put-call parity is holding based on your option pricing.

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