To Create the Arbitrage-Free Synthetic Call After One Period (In

question 19

Multiple Choice

To create the arbitrage-free synthetic call after one period (in the up state) you need to:

• A) buy 0.8585 shares of the stock and short sell 85.5777 units of the money market account
• B) buy 0.4827 shares of the stock and short sell 42.2642 units of the money market account
• C) buy 0.8585 shares of the stock and short sell 42.2642 units of the money market account
• D) buy 0.9343 shares of the stock and short sell 93.2677 units of the money market account
• E) None of these answers are correct.

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