Ask Question
6 August, 02:09

Suppose Amazon stock is trading for $ 495 per share, and Amazon pays no dividends. a. What is the maximum possible price of a call option on Amazon? b. What is the maximum possible price of a put option on Amazon with a strike price of $ 530 ? c. What is the minimum possible value of a call option on Amazon stock with a strike price of $ 465 ? d. What is the minimum possible value of an American put option on Amazon stock with a strike price of $ 565 ?

+3
Answers (1)
  1. 6 August, 02:31
    0
    a) $ 495

    b) $ 530

    c) $ 30

    d) $ 70

    Explanation:

    Given:

    Stock price = $ 495

    Strike prize = $ 530

    a) The maximum possible price of a call option on Amazon is the stock price,

    thus, the answer is $ 495

    b) the maximum possible price of a put option on Amazon is the strike prize, thus, the answer is $ 530

    c) given:

    strike price = $ 465

    now,

    Minimum possible value of call option is given as:

    ⇒ Stock price - strike price

    on substituting the values, we get

    ⇒ $ 495 - $ 465

    or

    ⇒ $ 30

    thus,

    answer is $ 30

    d) Given:

    strike price = $ 565

    Minimum possible value of an american put option on amazon stock is calculated as:

    ⇒ Strike price - stock price

    on substituting the values, we get

    ⇒ $ 565 - $ 495

    or

    = $ 70

    hence, the answer is $ 70
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Suppose Amazon stock is trading for $ 495 per share, and Amazon pays no dividends. a. What is the maximum possible price of a call option ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers