Hello experts!
Appreciate your kind help & advice on the following question.
Company ABC has a 6% coupon semi-annual bond with 3 more years to maturity.
The market price is at $108.
Has a $12 strike European Call option on its stock, is trading at $2.40 when the underlying is at $13.60. This option will expire in 6 months time. The risk-free rate is 4%.
a) With the given call option and the SOLVER in Excel, estimate the implied volatility of Company ABC. (Note: Company ABC is a non-dividend paying stock)
b) With Excel spreadsheet setup in part (a) determine the premium of the corresponding put option.
c) Henceforth, verify the Put-Call Parity idenity.
d) What is the Delta of this put option?
e) With the Excel spreadsheet setup in part (b) re-determine the put option premium when the underlying is $13.55
(f) Verify your results from part (b) and (e) with that of part (d).
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