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Unformatted text preview: 6. a. Keep gold stocks and buy 6-month puts with an exercise price equal to 83.3% of the current price. b. Sell gold stocks, invest £485,000 for 6 months at 6%. The remaining £115,000 can be used to buy calls on the gold stocks with the same exercise price. 9. a. Zero 2 b. Stock price less the present value of the exercise price. 10. The call price (a) increases; (b) decreases; (c) increases; (d) increases; (e) decreases; (f) decreases. 16. From put-call parity: C + [EX/(1 + r)] = P + S P = –S + C + [EX/(1 + r)] = –55 + 19.55 + [45/(1.025)] = $8.45...
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- Spring '11