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Question 18
Suppose that the current market price of a stock is MP = $10.00 per share. Current market premiums for a put options with strike
price SP = $11.00 is P = $1.00 per share. Current risk-free interest rate r = 5%. Assume that the time to expiration T = 1 year. What
would be the fair premium (C*) for the Call option on the stock with strike price SP=$11.00 per share? (Please, enter only the
numeric value - no letters or characters)
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Question 19
Refer to the problem stated in Question 18 (the last question). Suppose that the Call option on the stock with SP = $11 per share is
currently trading at a premium C=$0.22 per share. Is there a risk-free arbitrage opportunity?
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a
Yes
b
No
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