Today’s quotations for Tesco Plc. shares are given in thetable below. The shares are currently selling for ￡160 each. In each case,assume that you are the buyer/holder/owner of the option.
| Strike price (￡) | Call price (￡) (premium) | Put price (￡) (premium) |
150 | 4.25 | 2.20 |
170 | 3.50 | 4.00 |
Required
(i) Whichoptions is in-the-money?
(ii) Whichoptions is not in-the-money?
(iii) Thefollowing details in connection with Tesco Plc. shares are given in addition tothe above information.
Standard deviation = 25%
Time to maturity = 40 days
Risk-free interest rate = 12%
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