4 Questions for you to familiarize with option and warrants, especially the Call/Put Parity, formula and relations. Question 1 Pintail’s stock price…

4 Questions for you to familiarize with option and warrants, especially the Call/Put Parity, formula and relations. Question 1Pintail’s stock price is currently $200. A one-year American call option has an exercise price of $50 and is priced at $75. How would you take advantage of this great opportunity? Now suppose the option is a European call. What would you do?Question 2In June 2001 a six-month call on Intel stock, with an exercise price of $22.50, sold for $12.30. The stock price was $27.27. The risk-free interest rate was 3.9 percent. How much would you be willing to pay for a put on Intel stock with the same maturity and exercise price? Question 3Suppose that Mr. Colleoni borrows the present value of $100, buys a six-month putoption on stock Y with an exercise price of $150, and sells a six-month put option on Y with an exercise price of $50. Suggest two other combinations of loans, options and the underlying stock that would give Mr. Colleoni the same payoffs.Question 4a.) If you can’t sell a share short, you can achieve exactly the same final payoff by a combination of options and borrowing or lending. What is this combination?b.) Now work out the mixture of stock and options that gives the same finalpayoff as a risk-free loan.

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