A Futures Price Is Currently 40 Cents

question 2

Multiple Choice

A futures price is currently 40 cents.It is expected to move up to 44 cents or down to 34 cents in the next six months.The risk-free interest rate is 6%.What is the value of a six-month put option with a strike price of 37 cents?

• A) 3.00 cents
• B) 2.91 cents
• C) 1.16 cents
• D) 1.20 cents

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Definitions:

Conflicts

Situations where incompatible interests, beliefs, or actions lead to opposition between two or more parties.

Suspicious

Having or showing a cautious distrust of someone or something.

Experience

The knowledge or skill acquired by a period of practical involvement in an activity.

Slippery Slope Fallacy

A logical fallacy in which a relatively small first step is assumed to lead to a chain of related events culminating in some significant effect, often with little evidence to support the connection.