You Are Evaluating a Call Option with an Exercise Price

question 236

Multiple Choice

You are evaluating a call option with an exercise price of $140. The underlying stock has possible prices of $135 or $160 when the option expires. If the risk-free rate is 6%, how many options do you need to buy along with the risk-free asset to replicate the stock?

• A) 0.80 calls
• B) 1.00 calls
• C) 1.25 calls
• D) 1.75 calls
• E) 2.25 calls

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Definitions:

High-Class Standing

Refers to individuals or groups holding a position of superior social status, often associated with wealth, education, and power.

Inheritance

The process by which possessions, titles, debts, rights, and obligations are passed from one generation to the next, often upon the death of an individual.

Functional Theory

A sociological perspective that examines society as a complex system whose parts work together to promote solidarity and stability, focusing on social functions and contributions.

Intergenerational Mobility

Is social mobility that occurs between generations.