Suppose VS's Stock Price Is Currently $20

question 51

Multiple Choice

Suppose VS's stock price is currently $20. A six-month call option on VS's stock with an exercise price of $15 has a value of $7.14. What is the price of an equivalent put option? The six-month risk-free interest rate is 5 percent per six-month period.

• A)$1.43
• B)$9.43
• C)$8.00
• D)$12.00

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Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in the manufacturing process or providing a service, used as a basis for allocating labor costs.

Fixed Manufacturing Overhead

Costs related to the production process that do not vary with the volume of production, such as rent, depreciation, and salaries of permanent staff.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to production, based on a predetermined base such as direct labor hours or machine hours.

Direct Labor-Hours

The total hours worked by employees directly involved in the production process.