Unformatted text preview: cash inflow of $0.25. The exposure of the short position is completely covered by the long position in the October put, with a positive cash inflow today. 228. Using putcall parity and solving for the stock price we get: S + $3.15 = $85e –(.048)(3/12) + $6.12 S = $86.96 2220. If the standard deviation is infinite, d 1 goes to positive infinity so N(d 1 ) goes to 1, and d 2 goes to negative infinity so N(d 2 ) goes to 0. In this case, the call price is equal to the stock price, which is $35. Sources: http://www.mhhe.com/rwj http://tychousa.umuc.edu...
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This note was uploaded on 02/14/2011 for the course FINANCE 620 taught by Professor Halstead during the Fall '09 term at UMBC.
 Fall '09
 Halstead

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