a Secure I https/mewconnectmheducation.com/flow/ connect.htrml?isReg-true return

Question

a Secure I https/mewconnectmheducation.com/flow/ connect.htrml?isReg-true returnUrl=https%3A%2F%2Fconnect.mheducation.com%2Fpaamweb%2Findex.html u Check my work mode: This shows what is correct or incorrect for the work you have completed so for. it does not indicate completi 8 Ret Problem 20-30 2.5 oints Netflix is selling for $100 a share. A Netflx call option with one month until expiration and an exercise price of S109 sells for $240 while a put with the same strike and expiration sells for $11.25. a. What is the market price of a zero coupon bond with face value $109 and 1-month maturty? (Round your answer to 2 decimal places.) Answer is complete and correct. Market S 108.85 b. What is the risk-free interest rate expressed as an effective annual yield? (Round your answer to 2 decimal place.) Risk-free interest rate

Explanation / Answer

Put call parity states that
S+P=C+Xe^(-rt)
Xe^(-rt) is the market price of the zero coupon bond with facve value 109 and 1 month maturity
hence, Xe^(-rt)=100+11.25-2.4=108.85

=>100+11.25=2.4+109e^(-r*1/12)
=>r=-ln((100+11.25-2.4)/109)*12
=>r=1.6525%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.