Use the Following Information to Answer the Question(s)below

question 3

Multiple Choice

Use the following information to answer the question(s) below.
Consider an American put option on Rearden Metal stock with a strike price of $60 and one year to expiration.Assume that Rearden pays no dividends,its stock is currently trading at $15 per share,and the one-year interest rate is 5%.Also assume that it is optimal to exercise this put option early.
-The maximum value of a one-year American call option on Rearden Metal with a strike price of $60 per share is closest to:

• A)$0.
• B)$1.84.
• C)$2.48.
• D)$2.86.

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Definitions:

Short-Run Equilibrium

The price level and real GDP that result when the aggregate demand curve intersects the short-run aggregate supply curve.

Federal Funds Rate

The interest rate at which depository institutions lend reserve balances to other depository institutions overnight.

Price Stability

An economic condition in which prices remain largely stable, without rapid inflation or deflation.

Maximum Employment

A situation in which all available labor resources are being used in the most economically efficient way, one of the goals of economic policy.