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An investor is provided with the following information on American put and call options on a...

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Finance

An investor is provided with the following information onAmerican put and call options on a share of a company listed on theLondon Stock Exchange:

  • Call price (c0) = 33p
  • Put price (p0) = 49p
  • Exercise price (X) = 480p
  • Today: 11 June 2019
  • Expiry date: 20 December 2019
  • Current stock price (S0) = 458p
  • Risk-free interest rate (r) = 2.4%
  • The company pays no dividends.

Draw a graph showing the prices at expiry of a fiduciary calland another one showing a protective put, including all of theircomponents, in relation to the price of the stock in a rangebetween 350p and 600p.

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Transcribed Image Text

An investor is provided with the following information onAmerican put and call options on a share of a company listed on theLondon Stock Exchange:Call price (c0) = 33pPut price (p0) = 49pExercise price (X) = 480pToday: 11 June 2019Expiry date: 20 December 2019Current stock price (S0) = 458pRisk-free interest rate (r) = 2.4%The company pays no dividends.Draw a graph showing the prices at expiry of a fiduciary calland another one showing a protective put, including all of theircomponents, in relation to the price of the stock in a rangebetween 350p and 600p.

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