A Call Option Has a Premium of

question 3

Multiple Choice

A call option has a premium of $.50, a strike price of $26, and 3 months to expiration. The current stock price is $25.50. The stock will pay a $.40 dividend two months from now. The risk-free rate is 1%. What is the premium on a 3-month put with a strike price of $40? Assume the options are European style.

• A)$.25
• B)$.51
• C)$1.23
• D)$1.33
• E)$1.50

Identify the sources of loanable funds and their impact on the market.

Predict the effects of technological changes and economic expansions on the loanable funds market.

Understand the concept of compounded interest and its application.

Interpret and analyze financial tables related to bank accounts and loans.

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Definitions:

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