A Call Option with 1 Month to Expiration Currently Sells

question 51

Multiple Choice

A call option with 1 month to expiration currently sells for $.70. A put option with the same expiration sells for $1.10. The options are European style. The risk-free rate is 3% and the strike price of both options is $18.00. What is the current stock price?

• A)$16.87
• B)$17.06
• C)$17.29
• D)$17.56
• E)$17.86

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Definitions:

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, typically resulting from increased production where the cost per unit of output drops as scale increases.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are available to all and one person's use does not diminish another's.

Marginal Social Cost

The total cost to society of producing one additional unit of a good, including both the private costs and any external costs.

Efficient Level

An optimal point where resources are utilized in the most productive manner without waste, achieving the best outcome.