Consider a One-Year Maturity Call Option and a One-Year Put

question 69

Multiple Choice

Consider a one-year maturity call option and a one-year put option on the same stock, both with striking price $100.If the risk-free rate is 5%, the stock price is $103, and the put sells for $7.50, what should be the price of the call?

• A)$17.50
• B)$15.26
• C)$10.36
• D)$12.26

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Definitions:

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded, leading to a stable market condition.

Fine

A monetary charge imposed on individuals or entities as penalty for not complying with laws, rules, or regulations, distinct from a "fine imposed" which refers to the act of levying the fine.

Marginal Cost

The escalation in aggregate cost resulting from the production of an additional unit of a product or service.

Marijuana

A mind-altering substance derived from the Cannabis plant, utilized for either medicinal or leisurely activities.