question archive Interest rates are 5%
Interest rates are 5%
Subject:FinancePrice:2.86 Bought3
Interest rates are 5%. A European call with a strike price of $50 and a maturity of one year is worth $6. A European put with a strike price of $50 and a maturity of one year is worth $7. The current stock price is $49. Which of the following is true?
a.
The put price is high relative to the call price
b.
The call price is high relative to the put price
c.
To take advantage of this one would buy the put, buy the stock using borrowed funds and sell the call to make an automatic profit
Option 1
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Option 2
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