Suppose You Look in the Newspaper and See IBM Trading

question 149

Essay

Suppose you look in the newspaper and see IBM trading at $250 per share. Calls on IBM with one month to expiration and an exercise price of $245 are trading at $6.50 each. Puts on IBM with one month to expiration and an exercise price of $255 are trading at $3.50 each. Are these prices reasonable? Explain. (Ignore transactions costs).

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Definitions:

Facial Expressions

Visible changes in the face that convey a person’s emotional state, intentions, or social communications, often universally recognized.

Deaf and Blind

Refers to individuals who have impairments in both hearing and vision, significantly affecting their communication and learning methods.

Facial Expressions

The movements or positions of the face that convey emotional states or reactions to situations.

Trial and Error

A problem-solving method that involves attempting different solutions and eliminating those that do not work, to find the one that does.