Problem 20-30 Netflix is selling for $105 a share. A Netflix call option with on

Question

Problem 20-30 Netflix is selling for $105 a share. A Netflix call option with one month until expiration and an exercise price of $119 sells for $2.10 while a put with the same strike and expiration sells for $15.80. a. What is the market price of a zero-coupon bond with face value $119 and 1-month maturity?(Round your answer to 2 decimal places.) Market price 118.70 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 This is a numeric cell, so please enter numbers only.

Explanation / Answer

a. market price = 105 + 15.8 - 2.1 = 118.70

b. tisk free rate expressed as Effective annual yield = (119/118.70)12 - 1

tisk free rate expressed as Effective annual yield = 3.08

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