A Call Option with 6 Months to Expiration Currently Sells

question 93

Multiple Choice

A call option with 6 months to expiration currently sells for $2.05. A put option with the same expiration sells for $.60. The options are European style. The risk-free rate is 3.0% and the strike price of both options is $50. What is the current stock price?

• A)$47.89
• B)$49.19
• C)$50.72
• D)$51.29
• E)$52.08

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Definitions:

Equity Investments

Investments in shares of companies with the aim of earning dividends or selling the shares at a higher price.

Non-strategic Investments

Investments not central to a company's business model or core mission, often made for diversification or income generation purposes rather than long-term strategic initiatives.

Investment in Associates

A financial interest held in another company that gives the investor significant influence, typically reflected by ownership of 20% to 50% of the voting stock.

Unrealized Gain

An increase in the value of an asset that has not been sold, hence the gain is not reflected in the financial statements as actual profit.