Exhibit 22.3 Use the Information Below for the Following Problem(S)

question 2

Multiple Choice

Exhibit 22.3
Use the Information Below for the Following Problem(S)
A stock currently trades for $130 per share. Options on the stock are available with a strike price of $125. The options expire in 10 days. The risk free rate is 3% over this time period, and the expected volatility is 0.35.
-Assume that you have just sold a stock for a loss at a price of $75,for tax purposes.You still wish to maintain exposure to the sold stock.Suppose that you buy a call with a strike price of $70 and a price of $6.75.Calculate the effective price paid to repurchase the stock if the price after 35 days is $65.

• A) $71.75
• B) $76.75
• C) $58.25
• D) $81.75
• E) None of the above

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Definitions:

Dependent Children

Minors who rely on their guardians or parents for financial support and daily care.

Skills or Ability

The developed capacities or proficiency that individuals possess which enable them to perform tasks effectively.

Income Differences

The disparities or variations in earnings and wealth among individuals or groups within a society.

Taste-for-Discrimination Model

An economic theory that explains how personal bias can lead to discrimination in hiring and wage decisions.