The current price of YBM stock S is $101.American options with a strike price K = $100 and maturing in T= 6 months trade on YBM.The continuously compounded,risk-free interest rate r is 5 percent per year.If the American put price p_A is $2.70,then the American call price c_A will attain or lie between:

Question

Quizplus · Accepted Answer

The correct answer can be found using put-call parity for American options, which, while not as straightforward as for European options due to the possibility of early exercise, can still provide bounds for pricing. Given the information, the lower bound for the call price can be directly calculated using the intrinsic values and the cost of carry model, considering the current stock price, the strike price, the put price, and the risk-free rate. The upper bound is more speculative due to the nature of American options but can be inferred based on the given parameters and typical market behaviors.

The Current Price of YBM Stock S Is $101