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A Call Option with 60 Days to Maturity,exercise Price of $12.00,underlying

question 18

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A call option with 60 days to maturity,exercise price of $12.00,underlying spot price of $14.00 and risk-free rate of 7% p.a.is valued at $2.20.What is the value of a put option with the same characteristics? (Assume the call option premium is correctly priced and there are no dividends. )


Definitions:

Automatic Insertion Machine

A machine used in manufacturing for automatically placing components onto printed circuit boards.

Average Investment

An approach for calculating the mean amount invested over a particular period, considering both the initial and final investment levels.

Present Value Index

The present value index is a ratio used to determine the present value of future cash flows relative to the initial investment cost.

Net Present Value Analysis

A method used in capital budgeting to evaluate the profitability of an investment, calculating the present value of expected cash flows less the initial investment.

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