Question

In: Finance

GPT group is an Australian real estate investment trust, with shares currently trading at $6.35 (assume...

GPT group is an Australian real estate investment trust, with shares currently trading at $6.35 (assume this is the stock price at time 0). Consider a European call and European put on this stock, both with strike price $6.25 and the same maturity date; the call is currently selling for $0.21, and the put for $0.11.

(a) Assuming put-call parity holds, what is the present value of the strike? Given this, what is the return on a risk-free investment over this time period (i.e., R)?

(b) Construct a cash flow table where, at time zero, you short sell one call, buy one put, buy one share and borrow some money (so that your total cash flow at this time is 0). Construct subsequent cash-flow table(s) that resolve this investment at maturity.

(c) Is there an arbitrage opportunity here?

Solutions

Expert Solution

jeff jeffy answered 5 months ago
Next > < Previous

Related Solutions

real estate investment trust (REIT) competitive interaction
real estate investment trust (REIT) competitive interaction
real estate investment trust (REIT) competitive interaction
real estate investment trust (REIT) competitive interaction
can you explain competitive interaction in real estate investment trust (REIT)
can you explain competitive interaction in real estate investment trust (REIT)
The portfolio manager of a real estate investment trust (REIT) purchased 8 parcels of land for...
The portfolio manager of a real estate investment trust (REIT) purchased 8 parcels of land for $1 mil each exactly one year ago. Recently, an appraiser values 4 of the parcels at $1.5 mil each and the other 4 at $700000 each. The fiscal year of the company is identical to the calendar year and you can ignore any income received from the properties and taxes. a.                What are the company’s accounting earnings and economic earnings if the company sells...
REFeasibilty Ltd is an Australian real estate company. The financial manager is currently analysing two projects...
REFeasibilty Ltd is an Australian real estate company. The financial manager is currently analysing two projects and evaluating the potential of the investment opportunity. The estimated initial investment outlay and after-tax cash flows (incremental) associated with each project are shown in the following table: Project A Project B Initial investment ($40,000,000) ($25,000,000) Year Cash inflows 1 $2,200,000 $1,687,500 2 $2,288,000 $88,000 3 $2,380,000 $1,860,000 4 $2,475,000 $1,953,000 5 $2,574,000 $2,051,000 6 $2,677,000 $2,154,000 7 $42,832,000 $29,183,000 Assume the required rate...
Criticize the limited number of Islamic real estate investment trust (REITs) in Malaysia amid the unaffordability...
Criticize the limited number of Islamic real estate investment trust (REITs) in Malaysia amid the unaffordability of Muslims to own residential or commercial properties physical assets.
REIT B (REIT is a real estate investment trust) stock had returns of 12 percent, 6...
REIT B (REIT is a real estate investment trust) stock had returns of 12 percent, 6 percent, 14 percent, and -3 percent annually for the past four years. What is the mean and standard deviation of these returns? A. 7.25%; 13.22% B. 7.25%; 7.63% C. 8.75%; 9.11% D. 7.25%; 11.08% E. 8.75%; 10.29%
REIT C (REIT is a real estate investment trust) had returns of 14 percent, 3 percent,...
REIT C (REIT is a real estate investment trust) had returns of 14 percent, 3 percent, 9 percent, and -12 percent annually for the past four years. What is the mean and standard deviation of these returns? A. 3.50%; 11.26% B. 3.50%; .0069 C. 9.50%; .0100 D. 3.50%; .0381 E. 9.50%; .0033
Case Study: Real Estate Investment Trust (REIT) You have been presented with the following set of...
Case Study: Real Estate Investment Trust (REIT) You have been presented with the following set of financial statements for the Lynn Associates Trust (LAT), a REIT that is about to make an initial stock offering to the public. This REIT specializes in the acquisition and management of regional shopping centers. Your firm, Blue Street Advisors (BSA), is an investment management company that is considering the purchase of LAT shares. You have been asked to prepare a financial analysis of the...
can you explain competitive interaction in real estate investment trust (REIT) in the following Malaysian industries....
can you explain competitive interaction in real estate investment trust (REIT) in the following Malaysian industries. 1- ATRIUM 2- CMMT 3- HEKTAR 4- KIPREIT
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT