Question

the value of a put and the the value of 8- The higher the strike price, the a call, all else being equal. a) higher, higher b) lower; lower c) higher, lower d) lower, higher e) Doesn't move; higher 9-A 5-month European call option on a non-dividend-paying stock has a strike price of $30. The underlying stock is selling for $32 and the risk free rate is 6%. If the market value of the call is $35, is there any arbitrage opportunity and what's the profit in today's terms? a) Yes, $1.78 b) Yes, $0.76 c) No, $0 d) No, $3.5 e) Yes, $0 10-A European put option that expires in 6 months and has a strike price of $40, is selling for $3. A European call option that expires in 6 months, on the same underlying as the put option and has a strike price of $40, is selling for $1.5. The underlying stock is selling for $37, and a dividend of $0.75 is expected in 4 months and 8 months from now. The risk free rate is 6%. You believe that there's a mispricing in the value of the call. What should be the value of the call option, and how much net profit you will make at expiration? a) $0.447, $1.085 b) $0.447, $1.053 c) $0,$0 d) $1.5, S0 e) Cannot be determined from the information given

Answer 1

As per HomeworkLib guidelines when there are more than one question then we have to answer the first question.

8)Call and strike price has an inverse relation. The higher the strike price, the cheaper is the call option.

Put and stroke price has a direct relation. The higher the strike price, the more expensive is the put option.

So correct answer is c) higher, lower.