E2 880 c220 both the calls are american call options

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E2 = $880 C2=$20 Both the calls are American call options. What should be the price of call with E = $860? C (E low)- C (E high) ≤ E high – E low Thus, C1- $20 ≤ $880- $860 C1= $40 9. A stock trades for $120. A put on this stock has an exercise price of $140 and is about to expire. The put trades for $22. How would you respond to this set of prices? Explain According to Maximum value of a put option, at expiration, Put is Max [0, (E-S)]. So the put price should be $20, but in this case it trades for $22, the put is priced too high. Therefore, as a seller you can sell this put to gain $22. In addition, if you want to buy this put, it will be not good a deal. Because it is overpriced put without investment value.
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10. Consider two puts on Merck stock with January maturity. Put 1 trades at a price of $3.30 with an exercise price of $35. Put 2 has an exercise price of $60.00. What is the maximum price that put 2 can have? Assume American-style call options. P high – P low ≤ E high – E low P2- P1 ≤ E2- E1 Therefore, P2- $3.30 ≤ $60- $35 P2= $28.3
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