Assume That the Current Stock Price Is $50 Per Share,that

question 15

Essay

Assume that the current stock price is $50 per share,that call options can be purchased with an exercise price of $60 per share,that bank loans can be obtained for a 10% nominal rate,and that at expiration of the option in 3 months,the stock will either be valued at $30 or $70.Show that it is possible to replicate the stock payoff by borrowing and buying a call option.

---

Definitions:

Apsidal Chapel

A semicircular or polygonal termination or projection in a church, which often houses the altar and is located at the east end beyond the choir.

Monk's Quarters

Living spaces or cells designated for monks within a monastery, where they engage in prayer, meditation, and daily religious activities.

French Gothic

An architectural style that evolved in France in the 12th century, characterized by pointed arches, ribbed vaults, and flying buttresses.

Salisbury Cathedral

A historic Anglican cathedral in Salisbury, England, known for having the tallest church spire in the UK and its early English Gothic architecture.