The stock of Edwards Homes,Inc.has a current market value of $23 a share.The 3-month call with a strike price of $20 is selling for $3.80 while the 3-month put with a strike price of $20 is priced at $0.54.What is the continuously compounded risk-free rate of return?

Question

Quizplus · Accepted Answer

($20 × e^-R ^{× 0.25}) = -$3.80 + $23 + $0.54$20 e^-0.25R = $19.74ln(e^-0.25R) = ln 0.987-0.25R = -0.013085R = 5.23 percent

The Stock of Edwards Homes,Inc