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Question
The spot price of the market index is $900. After 3 months the market index is priced at $920. The annual rate of interest on treasuries is 2.4% (0.2% per month). The premium on the long put, with an exercise price of $930, is $8.00. At what index price does a long put investor have the same payoff as a short index investor? Assume the short position has a breakeven price of $930.A) $921.90
B) $930.00
C) $938.05
D) $940.00
Answer
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