Coca-Cola currently has a stock price of $53.75. It also has eight options avail

Question

Coca-Cola currently has a stock price of $53.75. It also has eight options available with the following Expiration Date, Strike Price (Exercise Price), and Option Price. For Example, you can buy a Feb 55 Call for $3.6 (or you could sell it for $3.6). The risk free rate between now and Feb is 2% while the risk free rate between now and May is 3%.

Expiration Strike Discounted Call Put

Month Price Value Price Price

Feb 50 49.02 4.2

Feb 55 3.30

May 50 .75

May 55 53.40 3.6

1. What is the Intrinsic Value (or Exercise Value) of the Feb 55 Put option?

a) $0 b) $1.25 c) $2.05 d) $3.3

2. What is the Time Value (or Premium) of the Feb 50 Call option?

a) $0.45 b) $1.25 c) $3.75 d) $4.2

3. Using Put-Call Parity, what is the value of the May 55 Put option?

a) $1.15 b) $2.85 c) $3.25 d) $4.85

Explanation / Answer

1. 55-53.75 =1.25 2. 4.2-3.75=.45 3. what is the current date? You need a time period for put call parity

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