Question 3 (15 points): You hold an American call option with a $30 strike price on a stock that currently sells at $35. The riskfree rate of interest is rf. Compare the cash flowsat expiration from (i) exercising the option now and putting the $5 proceeds in a bank account that pays the risk-free rate until the expiration date and (ii) holding onto the option until expiration selling short the stock today and placing $35 you receive into the same bank account.
You hold an American call option with a $30 strike price on a stock that currently sells at $35.
by | Sep 6, 2025 | Statistics
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