Ask Question
20 November, 21:00

What is a lower bound for the price of a 4-month call option on a non-dividend-paying stock when the stock price is $28, the strike price is $25, and the risk-free interest rate is 8% per annum?

+4
Answers (1)
  1. 20 November, 21:09
    0
    The lower bound for the price of a 4-month call option on a non-dividend-paying stock is 3.66

    Explanation:

    Lower bound = Stock Price - Strike Price*exp[-rt]

    = 28 - 25*exp[-8%*4/12]

    = 3.66

    Therefore, The lower bound for the price of a 4-month call option on a non-dividend-paying stock is 3.66
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “What is a lower bound for the price of a 4-month call option on a non-dividend-paying stock when the stock price is $28, the strike price ...” 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