Please show work. Alibaba is currently selling for $58 per share. In one year the price...

Please show work.

Alibaba is currently selling for $58 per share. In one year the price will either be 114 or 42. The risk free rate is 5%. What is the premium of a call option on Alibaba with a strike price of 68 and one year until maturity?
1. $0.71
2. $6.50
3. $3.90
4. $11.50
You purchased 100 shares of Pfizer at $16 and at the same time you bought a six-month put with a strike of $15 for $1.00. What is your profit or loss if you sell your shares and the put the day before expiration when Pfizer is at $12?
1. -$200
2. -$1,200
3. $200
4. $100

Expert Solution

Correct answers:

1. D. $11.50

2. A. -$200

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 2 years ago

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