For a non-dividend paying stock, a current stock price of $54.38, an exercise price of $50,...

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Answer 1

Answer #1

Current stock price(S0) = $54.38

Exercise price(X) = $50

Risk free rate(r) = 9.35% p.a

Maturity(t) = 5 month

We can compute the lower bound of Call option(CL) wih following equation:

- Os = 15

50 CL = 54.38 – 20.093545/12

C = 54.38 – 48.0895391463723

C = 6.29046085362771

C = $6.29

Hope it will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

Answer 2

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