You need to calculate the price of a three-month put option on Apple Stock with an exercise price of $130. Current stock
Posted: Tue Nov 23, 2021 8:41 am
You need to calculate the price of a three-month put option on
Apple Stock with an exercise price of $130. Current stock price is
$118. Short-term risk-free interest rate is 0.3% for 3 months; over
the option’s three-month life, stock price could rise to $142, or
fall to $98. You want to construct a portfolio of stock and loan to
replicate the investment in the option to calculate the put
price. Show your work to get full credit. Keep four
decimals. (Please explain the response in detail)
(a). Will you buy or sell how many shares of stock? (10
points)
(b). What’s the loan amount? (10 points)
(c). What’s the put price? (10 points)
Apple Stock with an exercise price of $130. Current stock price is
$118. Short-term risk-free interest rate is 0.3% for 3 months; over
the option’s three-month life, stock price could rise to $142, or
fall to $98. You want to construct a portfolio of stock and loan to
replicate the investment in the option to calculate the put
price. Show your work to get full credit. Keep four
decimals. (Please explain the response in detail)
(a). Will you buy or sell how many shares of stock? (10
points)
(b). What’s the loan amount? (10 points)
(c). What’s the put price? (10 points)