1.Consider a call option expiring in 60 days on a non-dividend-paying stock trading at 53 when the risk-free rate is 5%. The lower bound for a call option with an exercise price of 50 is:
A) $3.00.
B) $3.40.
C) $0.
D) $3.55.
2.Consider a call option expiring in 110 days on a non-dividend-paying stock trading at 27 when the risk-free rate is 6%. The lower bound for a call option with an exercise price of 25 is:
A) $2.00.
B) $2.44.
C) $0.
D) $1.97.
3.Consider a put option expiring in 120 days on a non-dividend-paying stock trading at 47 when the risk-free rate is 5 percent. What are the lower bounds for an American put and a European put with exercise prices of 50?
| American Put | European Put |
A) $2.20 $2.20
B) $2.20 $3.00
C) $3.00 $3.00
D) $3.00 $2.20
答案和详解如下：
1.Consider a call option expiring in 60 days on a non-dividend-paying stock trading at 53 when the risk-free rate is 5%. The lower bound for a call option with an exercise price of 50 is:
A) $3.00.
B) $3.40.
C) $0.
D) $3.55.
The correct answer was B)
53 - 50/(1.05)60/365 = 3.40.
2.Consider a call option expiring in 110 days on a non-dividend-paying stock trading at 27 when the risk-free rate is 6%. The lower bound for a call option with an exercise price of 25 is:
A) $2.00.
B) $2.44.
C) $0.
D) $1.97.
The correct answer was B)
27 - 25/(1.06)110/365 = 2.435.
3.Consider a put option expiring in 120 days on a non-dividend-paying stock trading at 47 when the risk-free rate is 5 percent. What are the lower bounds for an American put and a European put with exercise prices of 50?
| American Put | European Put |
A) $2.20 $2.20
B) $2.20 $3.00
C) $3.00 $3.00
D) $3.00 $2.20
The correct answer was D)
An American put can be exercised immediately for a $3 gain, the European put cannot be exercised until expiration so its minimum value is 50/(1.05)120/365 - 47 = $2.20.
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