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Which One of the Following Options Is More Expensive? Show

question 5

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Which one of the following options is more expensive? Show all calculations.
(a) A six- month put that carries a $40 strike price on a share that is currently trading at $35.84, given that the put trades at a 15 percent investment premium; or
(b) A six- month call that carries a $50 strike price on a share that currently trades at $54.75, while the call trades with a 12 percent investment premium?


Definitions:

Seize Property

The act of taking possession of property, often by legal authority, due to the failure to comply with a court order or owing to a breach of law.

Guarantor

A person or entity that agrees to be responsible for another's debt or performance under a contract if the original party fails to meet their obligations.

Creditor/Debtor Transaction

A financial relationship where one party (creditor) provides goods, services, or money to another party (debtor) under the agreement that the debtor will repay the creditor at a later date.

Security

Measures or instruments to ensure the enforcement of obligations or the protection of financial assets.

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