( d) Call options generally sell at prices above their exercise value, but for an inthemoney option, the greater the exercise value in relation to the strike price, the lower the premium on the option is likely to be.
( e) Because of the put-call parity relationship, under equilibrium conditions a put option on a stock must sell at exactly the same price as a call option on the stock.
6. Question:( TCO F) Suppose the December CBOT Treasury bond futures contract has a quoted price of 80-07. What is the implied annual interest rate inherent in the futures contract? Assume this contract is based on a 20 year Treasury bond with semi-annual interest payments. The face value of the bond is $ 1000, and the semiannual coupon payments are $ 30. The annual coupon rate on the bonds is $ 60 per bond( or 6 %). The futures contract has 100 bonds.
( a) 6.86 %( b) 7.22 %( c) 7.60 %( d) 8.00 %( e) 8.40 %