A Call Option Has a Premium of $1

question 42

Multiple Choice

A call option has a premium of $1.95, a strike price of $45, and 3 months to expiration. The current stock price is $42.20. The stock will pay a $1.15 dividend in one month. The risk-free rate is 2.5%. What is the premium on a 3-month put with a strike price of $45? Assume the options are European style.

• A)$2.08
• B)$2.15
• C)$3.32
• D)$4.12
• E)$5.62

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