Suppose you look in the newspaper and see ABC trading at $50 per share.Calls on ABC with one month to expiration and an exercise price of $45 are trading at $6.50 each.Puts on ABC with one month to expiration and an exercise price of $55 are trading at $3.50 each.Are these prices reasonable? Explain.(Ignore transactions costs.)

Question

Quizplus · Accepted Answer

The Answer of Suppose you look in the newspaper and see ABC trading at $50 per share.Calls on ABC with one month to expiration and an exercise price of $45 are trading at $6.50 each.Puts on ABC with one month to expiration and an exercise price of $55 are trading at $3.50 each.Are these prices reasonable? Explain.(Ignore transactions costs.)

Suppose You Look in the Newspaper and See ABC Trading