The Current Value of INDY Index Is 1,015 and a Portfolio

question 11

Multiple Choice

The current value of INDY index is 1,015 and a portfolio replicating this index has a value of $1,015.European options with a strike price K = $1,000 and maturing in T = 6 months trade on YBM.The continuously compounded,risk-free interest rate r is 5 percent per year.The stocks underlying INDY index have a dividend yield $\delta$ = 1.2 percent per year.A trader quotes a call price c= $80 and a put price p = $37.Then,the amount of arbitrage profits that you can make by trading securities based on one share of INDY are:

• A) 0
• B) $3.31
• C) $6.07
• D) $9.38
• E) None of these answers are correct.

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