Exhibit 20 -Refer to Exhibit 20

question 11

Multiple Choice

Exhibit 20.6
Use the Information Below for the Following Problem(S)
The current stock price of ABC Corporation is $53.50. ABC Corporation has the following put and call option prices that expire 6 months from today. The risk-free rate of return is 5% and the expected return on the market is 11%.
$$\begin{array} { c c c } \text { Exprcisp Price } & \text { Put Price } & \text { Call Price } \\50 & \$ 1.50 & \$ 5.75 \\55 & \$ 3.25 & \ldots\end{array}$$
-Refer to Exhibit 20.6.How could an investor create arbitrage profits?

• A) Sell the stock short, write a put, buy a call and invest the proceeds at the risk-free rate.
• B) Buy the stock, write a put, buy a call and invest the proceeds at the risk-free rate.
• C) Sell the stock short, buy a put, write a call and invest the proceeds at the risk-free rate.
• D) Buy the stock, write a put, buy a call and borrow the strike price at the risk-free rate.
• E) Sell the stock short, write a put, buy a call and borrow the strike price at the risk-free rate.

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Definitions:

Ponzi Scheme

A fraudulent investment scam promising high rates of return with little risk to investors, which generates returns for older investors through new investors' capital rather than legitimate profit.

Personal Property

Movable property not attached to real estate, such as vehicles, furniture, and jewelry.

Robbery

The act of taking someone's property through force or threat of force.

Criminal Fraud

Illegally deceiving another for personal or financial gain, considered a criminal offense.