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  3. given: c = $4.00, p = $6.00, s = $42, k = $45, t =

Given: C = $4.00, P = $6.00, S = $42, K = $45, T =...

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Finance

Given: C = $4.00, P = $6.00, S = $42, K = $45, T = 3 months, r =8%. The option contracts are written on 100 units of the underlyingasset. (Show work.)

  1. What would you do to exploit these quotes? (List alltransactions you would make.) What would be your risklessprofit?
  2. How could you synthetically sell a call option? What would bethe cash flow from doing this? (i.e., What is the synthetic callpremium?)

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Transcribed Image Text

Given: C = $4.00, P = $6.00, S = $42, K = $45, T = 3 months, r =8%. The option contracts are written on 100 units of the underlyingasset. (Show work.)What would you do to exploit these quotes? (List alltransactions you would make.) What would be your risklessprofit?How could you synthetically sell a call option? What would bethe cash flow from doing this? (i.e., What is the synthetic callpremium?)

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