The common stock of the C. A.L. L. Corporation has been trading in a narrow range around $95 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $95 is $6.00. a. If the risk-free interest rate is 9% per year, what must be the price of a 3-month call option on C. A.L. L. stock at an exercise price of $95 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.).3

$ 8.02

Explanation:

Solution

Given that:

The trading narrow range of the CALL corporation = $95

The range stay = 3 months

The price of a 3 month put option with a price exercise = $6.00

Risk free interest rate = 9%

Now

Recall the call put parity equation:

C = P + S - K x (1 + r)-T

= 6 + 95 - 95 x (1 + 9%)-3/12 = $ 8.02

Therefore the price he price of a 3-month call option on C.A.L.L. stock at an exercise price of $95 if it is at the money is $ 8.02

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

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